In 2007, $228 billion of CMBS conduit loans were pooled and sold as CMBS securities in the United States, the largest amount in history. Most of the loans provided for a 10-year term, creating a potential refinancing bonanza for 2017. As it turns out, the majority of the loans were closed in the first half of 2007, so the maturity wave is nearly over. Few CMBS conduit loans will mature in 2018-2020 as less than $25 billion of CMBS conduit loans were closed in that three-year period.
New originations from the 2007 era continue to disappoint. Many good loans have elected to refinance through non-CMBS programs. A large proportion has not been able to refinance at all. As evidence, the delinquency rate for CMBS conduit loans rose in March to 5.37%, according to Trepp, and has moved higher in 11 of the past 13 months. In March, another batch of loans turned newly delinquent, increasing the delinquency rate from 5.31% in February. Trepp notes, “It is hard to see the rate going down anytime in the near future. We still believe that trend will continue until the summer as the ‘wall of maturities’ plays out. The rate should begin to level off or retreat later in 2017.”
Industrial, retail, and lodging delinquencies helped push the rate higher in March. Delinquency readings for office and multifamily loans fell month over month. The industrial delinquency rate increased dramatically, to 7.03% from 5.94%. Office delinquency fell to 7.38% from 7.55%, but remains the worst performing asset class in CMBS. Multifamily delinquency dropped to 2.60% from 2.82% and remains the best performing asset class in CMBS.