The proportion of late payments among bonded debt secured by commercial mortgages more than tripled in May, reaching 7.4 percent from April’s rate of 2.3 percent, according to research firm Trepp.
Another 8.6 percent of the loans were in their 30-day grace period, meaning the payment date has been missed but is not yet 30 days past due, at which point the lender can take legal action.
So-called commercial mortgage-backed securities (CMBS) bundle commercial mortgages and then use the bundles to guarantee loans.
The $1.3-trillion CMBS market has been battered by hotels, shops, and restaurants being shuttered for weeks; corporate bankruptcies leading tenants to default on leases; and millions of jobless workers unable to pay their rent.
The delinquency rate among CMBS centered on lodging sector mortgages soared from 2.7 percent in April to more than 19 percent in May. Another 15.6 percent were in their grace period, Trepp reported.
Among retail mortgages, defaults rose from 3.7 percent to 10.3 from April to May with 13.4 percent under grace.
A 2018 CMBS with 19 percent of its mortgage portfolio in lodging is trading at 56 cents on the dollar, falling from 94 cents since early March. A 2015 Citigroup package heavy in retail property mortgages traded at 98 cents to the dollar before the economic shutdown and recently fetched 55 cents.
“We expect more” delinquencies “in June,” said Manus Clancy, Trepp’s senior managing director.
TRENDPOST: Again, despite these dismal numbers, equity markets have been on the fly not because of hard facts and data that should have brought them down, but for only one reason: the money pumping Fed has rigged the game. Stock market values have no relation to P/E ratios or bottom line financial facts.
