Excluding GGP Trickery, CMBS Delinquencies Hit Another Adjusted Record High Of $30.5 Billion For July

RealPoint has released their July CMBS delinquency report, and if one adds the surprising switch of $4.8 billion in GGP loans which amusingly were returned to current payment status, the July delinquency total has hit a total of over $30 billion - an all time record.

In July 2009, the delinquent unpaid balance for CMBS decreased for the first time since August 2008 after 10 straight monthly increases, down to only $25.68 billion from $28.65 billion a month prior. The decline through July, however, came after nearly $4.8 billion of GGP sponsored loans were returned to current payment status following a 30-day delinquent status in June.

It seems nothing will stop the "data presenters" from trying all their best to paint as rosy a picture as they can. Alas, with GGP currently struggling through not just bankruptcy but the implications of a potential substantive consolidation, to think that there is anything that can be a long-term benefit to GGP's tenants in this environment as they vacate the mall operator's leases in droves is simply hilarious.

So here is how the latest data massaging will come as more and more REITs eventually succumb to dropping rents, while pretending that all is good:

While the ultimate resolution of these GGP-sponsored specially-serviced loans has yet to be determined, many were reported as current in July 2009 after multiple master servicers made modifications to their systems to account for the non-default rate interest-only payments being made on previously amortizing (principal and interest required) loans.

Luckily RealPoint has yet to fall for this particular ruse (even if the same can not be same for momo market chasers):

On the other hand, not all master servicers are accounting for the GGP payments and cash-collateral order in the same fashion, and these loans remain on our Realpoint Watchlists for potential future delinquency and / or workout via liquidation.

And here is RealPoint's adjusted version of the truth:

Even if the $4.8 billion of GGP-sponsored loans that returned to current payment status in July were omitted from the reported delinquency stats in June (effectively ignored for delinquency reporting purposes), the monthly trend of growth for CMBS delinquency would have continued. Specifically, after removing these loans, CMBS delinquency still increased from $18.78 billion in May 2009 (2.275%) up to a hypothetical $23.85 billion in June 2009 (2.92%), and then to 25.68 billion in July (3.135%).

In summary: CMBS loans delinquencies are still accelerating with no end to the collapse in sight, and the real pain is starting to focus on the 90+ delinquent category.

Despite the decline, the delinquent unpaid balance through July 2009 remains up an astounding 511% from one-year ago (when only $4.2 billion of delinquent balance was reported for July 2008), and is now almost 12 times the low point of $2.21 billion in March 2007. Outside of the 30-day delinquency decline, an increase in the remaining four delinquent loan categories was noted in July. More notably, the distressed 90+-day, Foreclosure and REO categories grew in aggregate for the 20th straight month – up by $2.15 billion (15%) from the previous month and over $13.63 billion (377%) in the past year. The total unpaid balance for all CMBS pools under review by Realpoint was $819.2 billion in July 2009.

For the full RealPoint report, click here.