The commercial mortgage-backed securities market is showing some welcome improvement, according to data released today by commercial tracking firm Trepp. Almost 50 percent of loans in CMBS were paid off before their balloon date — the date at which the loan matures and the remainder of the balance is due. This is more than 10 percentage points higher than the rate seen in June, according to Trepp, and the highest level seen since 2008. Before the recession, the payoff percentages hovered above 70 percent, according to the tracking firm. While this is certainly progress, however, Trepp cautioned against overly exuberant optimism. “This month’s number reinforces the notion that the recovery in commercial real estate lending is still in the embryonic stage,” a spokesperson for Trepp said. “In order to feel truly confident that lending for maturing CMBS loans in gaining traction, we would want to see this percentage exceed 50 percent for a period of three to four months.” TRD

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The commercial mortgage-backed securities market is showing some welcome improvement, according to data released today by commercial tracking firm Trepp. Almost 50 percent of loans in CMBS were paid off before their balloon date — the date at which the loan matures and the remainder of the balance is due. This is more than 10 percentage points higher than the rate seen in June, according to Trepp, and the highest level seen since 2008. Before the recession, the payoff percentages hovered above 70 percent, according to the tracking firm. While this is certainly progress, however, Trepp cautioned against overly exuberant optimism. “This month’s number reinforces the notion that the recovery in commercial real estate lending is still in the embryonic stage,” a spokesperson for Trepp said. “In order to feel truly confident that lending for maturing CMBS loans in gaining traction, we would want to see this percentage exceed 50 percent for a period of three to four months.” TRD

[more]

The commercial mortgage-backed securities market is showing some welcome improvement, according to data released today by commercial tracking firm Trepp. Almost 50 percent of loans in CMBS were paid off before their balloon date — the date at which the loan matures and the remainder of the balance is due. This is more than 10 percentage points higher than the rate seen in June, according to Trepp, and the highest level seen since 2008. Before the recession, the payoff percentages hovered above 70 percent, according to the tracking firm. While this is certainly progress, however, Trepp cautioned against overly exuberant optimism. “This month’s number reinforces the notion that the recovery in commercial real estate lending is still in the embryonic stage,” a spokesperson for Trepp said. “In order to feel truly confident that lending for maturing CMBS loans in gaining traction, we would want to see this percentage exceed 50 percent for a period of three to four months.” TRD

[more]

Despite the all-time high delinquency rates seen among commercial mortgages, more lenders are showing optimism toward the commercial mortgage-backed securities market, and are gingerly buying up shares in the real estate investment trusts that own those loans, according to the Wall Street Journal. And their positive outlook might be justified — overall, REITs are up about 16.7 percent so far this year and some commercial-mortgage REITs, like iStar Financial and Arbor Realty Trust have made strides as well, up 140 percent and 113 percent so far this year, respectively, according to the Wall Street Journal. But Jason Yablon, a vice president with investment firm Cohen & Steers, said that the positive momentum needs to be taken with a grain of salt. “Because the stock has been beaten down, any incremental good news [about] the financing environment is going to make the stock move a lot,” Yablon said.

March ushered in a sharp rise in delinquencies on commercial real estate loans in commercial mortgage-backed securities, dashing hopes that February’s modest delinquency climb signaled the beginning of the end of the industry’s woes, according to a new report from analytics firm Trepp (click here for the full report). The percentage of loans that were delinquent by 30 days or more jumped 89 basis points in March, which represents the highest month-over-month increase since the summer of 2009. That number was inflated by roughly 40 points because of the $3 billion Stuyvesant Town loan that is now in foreclosure, but even without the Stuyvesant Town loan, the delinquency rate rose by 0.49 percent in March, more than double the increase seen in February. TRD
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By the close of 2010, the country may be looking at more than $60 billion in distressed loans that are tied up in commercial mortgage-backed securities, according to a new Credit Suisse Group report released yesterday. Troubled loans are increasing by $2.7 billion a month, as of the fourth quarter of 2009, up from $1.4 billion a month during the first quarter, and the buildup could prevent a larger economic recovery. About 5 percent of loans are at least two months overdue, a more than 10-fold increase over the end of 2008 and an overwhelming caseload for special servicers. Discounting the loans that are not yet in distress, it would take such companies five and a half years to resolve the $28.8 billion in delinquent loans. “The transfer of distressed loans into the hands of stronger operators to create value at the property level where in turn they contribute to local economies is a vital step in any recovery,” according to the report. [Reuters]

From the November issue: The new tax rules handed down by the Treasury Department in mid-September are prompting more lenders to employ already-popular “extend and pretend” and “delay and pray” strategies. These darkly comic catchphrases, of course, are used to describe the practice of extending the maturity on troubled loans rather than working out a deal that would reveal just how little the debt is now worth. Those who follow commercial real estate say the federal government’s new regulations — which were designed to help facilitate the modification process for troubled securitized loans — give loan servicers greater leeway to extend loans. Attorneys and advisors with experience working on troubled loans say they have seen a big increase in “extend and pretend” transactions this year across various asset classes. They forecast more such deals, thanks to two favorable trends — the new accounting rules and low interest rates. “Our view is that this condition [of rampant extensions] is going to continue for a while — the alternative is for lenders to decide they have to recognize losses,” said Paul Fried, managing director at advisory firm Traxi.

A commercial real estate rebound “will not be any time soon,” Moody’s
Senior Vice President Daniel Rubock wrote in a recent report entitled
“For CMBS, Recovery Appears Through a Glass, Darkly — and Slowly.”
Rubock predicts the recovery could begin in late 2010 or early 2011,
with the worst case scenario being a recovery beginning in 2012. Rising
unemployment, vacancy and capitalization rates will continue to keep
commercial growth slow. The commercial mortgage backed security
delinquency rate currently stands at 3 percent and will likely rise to between 5 and 6
percent by the end of this year. [more]

Federal Reserve Chairman Ben Bernanke said a potential wave of
commercial real estate defaults may present a challenge for the economy
and urged lenders to modify problem mortgages to avoid defaults.
Federal policy makers will extend the TALF, which began accepting
commercial mortgage-backed securities as collateral last month, if they
feel that the financial markets are still “some distance from normal
operation,” Bernanke said. Since the peak of the market, commercial
property prices have fallen 35 percent and more than $108 billion worth
of commercial property is now in default, foreclosure or bankruptcy,
according to reports by Moody’s Investor Services and Real Capital
Analytics.
[more]

From the outset of the discussion on Manhattan’s commercial real estate market this morning, developer Kent Swig of Swig Equities gave a gloomier assessment than co-panelist and landlord Norman Sturner of Murray Hill Properties. Swig, at times waxing poetically about the troubles in the securitized commercial debt market, said although residential properties showed signs of stabilizing, the office market had farther to fall. “I don’t know if picking up is the right term,” he said of the commercial real estate industry. [more]