The delinquency rate for securitized commercial real-estate loans jumped 28 basis points to 5.75% in June from May, the biggest month-over-month increase since March 2012 and up sharply from the 4.6% recorded in June last year, according to real estate provider Trepp Inc.
Mortgages for multifamily residential buildings rose by 110 basis points to 3.92% in June from May, the biggest gain among property types. The rise was due to defaults on two large loans in Virginia.
Delinquency rates for lodging, industrial property, office and retail all rose in June, to 3.53%, 7.57%, 7.67% and 6.65%, respectively.
As commercial mortgage-backed securities issued in 2006 and 2007 come due, the delinquency rate has moved up in 13 of the last 16 months. Investors have been bracing for the impact of defaults from the "wall of maturities." Roughly $2.4 billion in loans became delinquent in June, Trepp said.
Among property sectors, landlords of retail property find CMBS lenders more restrictive on loan proceeds and believe they have a preference for top-tier markets. "Non-mall retail assets such as shopping centers are gaining share of scarce CMBS retail lending and high-quality malls, such as those that dominate the REIT portfolios, continue to enjoy CMBS access," said Jeffrey Donnelley and Tamara Fique, analysts at Wells Fargo Securities Research, in a note.
This means low-quality malls, or the so-called B and C malls, could face a bigger refinancing risk upon maturity. That said, lenders are becoming more willing to renegotiate loan terms with borrowers rather than repossess a mall.
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(END) Dow Jones Newswires
July 04, 2017 08:14 ET (12:14 GMT)