Trepp Sees Rise in CMBS Delinquency

NEW YORK CITY-On the surface, the June rise in CMBS delinquency over May looks especially alarming: the rate appears to have crept past 4% months ahead of the year-end time-frame predicted by Moody’s, and has increased about 175% since last month. But that bulge is due largely to several of the loans associated with the bankruptcy of General Growth Properties, which inflate the tally, according to Trepp. Even so, the locally based provider of CMBS information says the delinquency rate is going to keep ticking upward.

“It’s hard to see anything turning it around, absent the capital markets rebounding,” Manus Clancy, managing director at Trepp, tells GlobeSt.com. He cites eroding fundamentals across the asset classes; for example, in the past few days both CB Richard Ellis and Jones Lang LaSalle have issued reports of increasing Manhattan office vacancies, although CMBS delinquencies in the office sector are still less than 2%. The hospitality sector–which in the past month saw the bankruptcies of Extended Stay Hotels and Red Roof Inn–is being hit especially hard. “The flyaway-destination hotels are getting hammered, in both reality and perception,” Clancy says.

Retail, too, is taking its lumps, accounting for the majority of the top 15 delinquent loans in Trepp’s monthly TreppWire report issued on Wednesday. However, Clancy says the statistical bulge is because GGP makes the delinquency picture appear more dire than it is.