What’s this? Some good news for the CMBS sector?
Not quite.
While the delinquent unpaid balance for CMBS decreased in July 2009 – for the first time since Aug. 2008 – it’s mostly down to a single CMBS name, according to the latest monthly report by Realpoint Research. That name: General Growth Property.
When the investment trust went under in April, it took about 160 small shopping centres with it – about 100 of which are held in CMBS. Much of June’s unpaid CMBS value stemmed from GGP-sponsored stuff falling into 30-day delinquency as CMBS-holders wrangled in court over the trust’s bankruptcy. However, about $4.8bn of GGP-related CMBS has now been returned to current payment status, according to Realpoint.
Notably, however, there’s still a rather big question mark over the future of GGP-sponsored CMBS. Here’s Realpoint’s commentary:
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. 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.
In fact, if you remove the GGP-exposure you still get delinquent CMBS increasing – from $18.87bn in May (a delinquency rate of 2.275 per cent) to something like $23.85bn in June (2.92 per cent) and then to $25.68bn in July (3.135 per cent) – another record high.
In other words, CMBS is still a mess.
Related links:
US CMBS delinquencies could exceed 5% by year end – FT Alphaville
Commercial real estate watch – FT Alphaville
“Losses on UK commercial real estate could equal subprime” – FT Alphaville