NEW YORK CITY—With the so-called “wall of maturities” for legacy CMBS gradually crumbling, the year-to-date payoff rate for 2017 has stabilized at around 70.5%, S&P Global Ratings said Wednesday. Shorter loan terms in recent vintages indicate a steady volume of maturities over the next several years, averaging about $40 billion annually, according to S&P.
The ratings agency's most recent CMBS maturity tracker shows that September actually saw a lower starting payoff rate compared to the three preceding months. The lower rate was on account of a significantly larger percentage of loans—12.5%—securing maturity date extensions during the month. In comparison, June, July, and August saw extensions for 2.3%, 7.9% and 7.6% of the total monthly maturities, respectively.
About $10 billion in loans remains outstanding to mature in fourth-quarter 2017, of which $2.3 billion matures in October, $5 billion matures in November and the remaining $2.7 million matures in December. By property type, the outstanding loans include $4 billion for retail, $2.4 billion for office, $2 billion for lodging and $1 billion for multifamily. The next maturity wall peak will be in 2023, when over $70 billion in loans are slated to mature.
Thanks to strong new issuance, CMBS delinquencies across the board declined six basis points to 3.53% in September from 3.59% a month earlier, Fitch Ratings said earlier this week. Resolutions of $639 million in Fitch-rated loans and new delinquencies of $600 million last month were both well below their year-to-date monthly averages.
Meanwhile, according to Fitch, new issuance volume of $7.3 billion from eight transactions in August significantly exceeded last month's portfolio runoff of $2.9 billion. Fitch says it expects that new issuance volume will continue to outpace portfolio runoff as an additional $8 billion of new issuance from seven transactions will be added to next month's figures, compared to less than $7 billion of outstanding loan maturities within the Fitch-rated universe through the end of this year.
Largest of the new delinquencies recorded for September was the $93-million Charleston Town Center loan (BSCMS 2007-TOP28), which defaulted at maturity. The largest resolution last month was the $124-million Metropolitan Square loan (WBCMT 2005-C21), which is secured by a 987,300-square-foot office property located in downtown St. Louis.
The month's biggest improvement in delinquencies occurred in the office sector, where late-pays declined 22 bps to 5.84%. The largest increase was a 31-bp rise for industrial to 4.24%. Other property types and their September delinquency rates were as follows: retail, down seven bps to 6.10%; mixed use, down six bps to 3.32%; hotel, down two bps to 2.85%; multifamily, down one bp to 0.68%; and “other” CMBS, up seven bps to 0.87%.
Although employing a different yardstick than Fitch, which measures delinquencies on the basis of deals it has rated, Trepp LLC also sees the late-pay rate moving in the right direction. The information provider said in at September's end that delinquencies for the month just ended dropped four bps to 5.40% from August. The Trepp CMBS delinquency rate has now declined for three months in a row; it stood at 5.75% at the end of June, following a spike of 28 bps.
“After more than two years, the 'wave of maturities' has been reduced to a mere ripple,” says Manus Clancy, senior managing director at Trepp. “The volume of maturing debt coming due every month has already begun to wane, meaning the rate of delinquent loans should hold steady or recede in the coming months. We will probably look back on the past two years with a sense of relief, somewhat like the kid at the beach who nervously spots a big wave approaching, only to see it downgrade to a small swell when it hits land.”
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
