CMBS Transfers to Special Servicing Taper Off
21 Mar 2011 |
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Article from GlobeSt.com
NEW YORK CITY-The pace of US CMBS loans transferring to special servicing has slackened since 2009, and the year-to-date tally is about one-third of what it was 12 months ago, Fitch Ratings said Friday. That being said, a slowdown does not mean a full stop: earlier in the week, Moody’s Investors Service noted that the delinquency rate for CMBS continued to tick upward last month, albeit at the more moderate pace seen since June 2010.
About 200 Fitch-rated CMBS loans have gone into special servicing since the start of 2011. That compares to 631 for the same period in ’10. Longer term, the number for last year declined to 1,646 loans worth a combined $28.4 billion from the 2009 total of 2,162 loans worth $37.5 billion.
“Following a monthly high of 255 loan transfers in January ‘10, new specially serviced transfers steadily decreased each month, reaching a low of 74 in November,” Mary MacNeill, managing director at Fitch, says in a release. Since then, she adds, the number of monthly loan transfers has not gone above 78.
The percentage breakdown of loans going into special servicing reflects the varying rates of recovery across the commercial real estate sectors. Reflecting the resurgence in the lodging sector, the volume of new hotel loans transferring has dropped to 8% of the total of new transfers, according to Fitch.
Similarly, Moody’s says February’s delinquency rate for hotel-backed CMBS fell 34 basis points to 16.41%. During the month, only 20 hotel loans totaling $333 million were newly delinquent, while over $500 million in hotel loans became current, were worked out or were disposed.
By contrast, the office sector continues to lead new transfers into special servicing at 41%, Fitch says. The sector also topped the list for ’10, representing 25% of new transfers, according to the ratings agency.
Although office CMBS continue to rank as the best-performing sector in the Moody’s-rated universe, the 34-bps increase in the office delinquency rate during February was the same as the decline for hotels. “Continued high unemployment and lack of job growth will continue to force office loan borrowers to seek relief as leases roll or are renegotiated,” says MacNeill.
February saw a 17-bps increase in the CMBS delinquency rate to 9.18%, as measured by the Moody’s Delinquency Tracker. A total of $4.1 billion in loans became newly delinquent, while previously delinquent loans totaling about $3 billion became current, worked out, or disposed of, Moody’s says. In all, the number of delinquent loans increased to 4,112 in February from 4,052 in January, and the total balance of delinquent loans increased to net $56.8 billion from $55.7 billion.
“As the specially serviced loan rate is 3.3% above the delinquent loan rate, this signals that further increases in the delinquency rate are to be expected,” Tad Philipp, director of commercial real estate research, says in a release.
The Delinquency Tracker measures CMBS loans issued since 1998 with a balance greater than zero, and Moody’s expects the addition of new loans to the Tracker to dilute the delinquency rate. Since all of the newly issued loans are current, they’ll add to the loan total and lower the percentage that are delinquent.
