Moody's Reports January Increase In CMBS Delinquency Rate To 5.42% Is Largest On Record
The January Moody's CMBS delinquency rate hit a record at 5.42%, after posting the largest one month increase (50 bps) in history. While the deplorable state of CMBS is not a secret to anyone following RealPoint's monthly delinquency data, getting confirmation from a procyclical firm such as Moody's should be enough to wake up some of the optimists that even thought "everyone is talking about the commercial real estate" collapse, nothing is being done to actually fix the underlying causes. Anyone recall "contained" Dubai and its freshly record CDS spreads?
The breakdown of the various delinquency rates by property types and vintages is presented below.
Anyone thinking that the rate of deterioration in CMBS is moderating, please take a look at the chart below which shows the magnitude of the monthly change in the delinquency rate.
The delinquency by vintage demonstrates a very bimodal distribution, where while the weakness in the 2006-2008 vintages is to be expected, the dramatic spike in 1998-2000, and particularly 1999, is a novel phenomenon.
The reason for this is described by Moody's:
The 1999 vintage had the worst performance in 2009, partly due to ten-year loans from that cohort coming due and attempting to refinance in an unfavorable economic environment. The delinquency rate for the 1999 vintage was 3.59% a year ago and currently stands at 22.52%. We expect to see a significant increase in the delinquency rate of the 2000 vintage in 2010, as the ten year loans mature in an improving, but still credit constrained environment.
Unlike recent vintages, which are delinquent mostly in the 60+ day past due category, the anniversary vintages (1998,1999) are delinquent mostly due to maturity default.
Earlier vintages are experiencing a mix of all three types of delinquency. As discussed above, the 1999 and 2000 vintages have a significant share of maturity defaults from ten-year loans. Likewise, the 2004 and 2005 vintages have a large proportion of maturity defaults due to five-year loans.
The capital to pay down, refi maturities is just not there. This has a very negative implication on the CRE market, where REITs are trading on the assumption that capital (refi or otherwise) for any and all CRE ventures is again freely flowing.
Below is a summary of delinquency rates by state:
And here is a brief overview of recent remittances and the top 10 newly delinquent loans. We will present an extended remittance list shortly.
Full Moody's report.