US CMBS Delinquency Rate Ends Year Down 168 Basis Points

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During the course of the 2014, the Trepp CMBS delinquency rate improved every month but two to end the year down 168 basis points.

Percentage of Loans Delinquent for 30+ Days

Coupled with the consistently decreasing delinquency rate, the outstanding CMBS collateral pool continues to improve going into what could be a strong issuance year.

Trepp, LLC, the leading provider of information, analytics, and technology to the CMBS, commercial real estate, and banking markets, released its December 2014 US CMBS Delinquency Report today (available at http://www.trepp.com/knowledge/research).

During the course of the 2014, the Trepp CMBS delinquency rate improved every month but two to end the year down 168 basis points. The delinquency rate for US commercial real estate loans in CMBS is now 5.75%, the lowest rate since November of 2009.
Among the major property types, the lodging sector saw the biggest year-over-year improvement. The delinquency rate for hotel loans fell 314 basis points during 2014. The retail sector saw the smallest improvement among the property types, as it dropped 40 basis points over the course of the year.

“2014 was another great year in terms of seeing the delinquency rate fall,” said Manus Clancy, senior managing director at Trepp. “Special servicers resolving delinquent loans certainly had a lot to do with that, but low interest rates, tight CMBS spreads, and plenty of funding sources also helped.”

In the month of December, almost $1 billion in loans became newly delinquent. However, nearly $700 million of CMBS loans were liquidated, while another $700 million in loans were cured.

“Over the next 12 months, arguments could be made for the rate going either up or down. If you believe that the wave of 2005 vintage loans will have a much harder time than the class of 2004, you probably believe rates are heading back up. The same goes if you believe there will be a spike in the 10-year Treasury rate. If neither of those factors come to pass, the rate should continue to fall,” Clancy said.

The CMBS market heads into the new year with a lot of momentum. A surge in issuance in the second half of 2014 has led many lenders to predict that issuance will crack the $100 billion barrier in 2015. With the 10-year Treasury hovering in the low 2% range and CMBS spreads remaining fairly steady in recent months, the CMBS market should kick off 2015 in fine form.

“The pace of defeasances remains well above average as borrowers look to lock in low rates,” said Joe McBride, Research Associate at Trepp. “Coupled with the consistently decreasing delinquency rate, the outstanding CMBS collateral pool continues to improve going into what could be a strong issuance year.“

For additional details, such as delinquency status and historical comparisons, request the December 2014 US CMBS Delinquency report at http://www.trepp.com/knowledge/research. For daily CMBS commentary, follow @TreppWire on Twitter.

About Trepp
Trepp, LLC, founded in 1979, is the leading provider of information, analytics and technology to the CMBS, commercial real estate and banking markets. Trepp provides primary and secondary market participants with the web-based tools and insight they need to increase their operational efficiencies, information transparency and investment performance. Trepp serves its clients with products and services to support trading, research, risk management, surveillance and portfolio management. Trepp is wholly-owned by dmg b2b, a division of the Daily Mail and General Trust (DMGT).

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Joe McBride
Trepp
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