A new report from Trepp takes a look at the state of commercial mortgage-backed securities (CMBS) lending in Q3 2022. While the report covers lending for all commercial property types, this article focuses on the state of multifamily lending.
Measuring commercial mortgage stress
Trepp reported that the CMBS delinquency rate has been trending lower since spiking in the early days of the COVID pandemic. In September, the overall CMBS delinquency rate was 2.9 percent, but the rate varied widely by property type. CMBS loans on industrial property had the lowest delinquency rate at 0.5 percent, while CMBS for retail properties had the highest delinquency rate at 6.8 percent. The CMBS delinquency rate for multifamily properties was 1.1 percent.
The Trepp report also discussed the change in the portion of CBMS loans that are under special servicing. The dollar volume of these loans was as high as $52.9 billion as recently as December 2020. The dollar volume of CMBS loans under special servicing then reached a low point in July 2022 but moved higher in August and September. The September special servicing dollar volume reached $30.3 billion, representing 4.9 percent of CMBS loans outstanding.
For multifamily CBMS loans, the dollar value of loans under special servicing was $1.21 billion in September 2022. This represents 1.87 percent of the dollar volume of loans outstanding. Note that a follow-on report says that the special servicing rate for multifamily loans fell to 1.65 percent in October. However, that report does not give a dollar value for the multifamily loans under special servicing.
Trepp reported that only 16 private-label CMBS deals with a total balance of $13.3 billion were priced in Q3 2022, down 39 percent from the volume in the same quarter last year. In addition, 4 collateralized loan obligation (CLO) deals were priced in Q3 totaling $3.4 billion, down 17 percent from the volume in the same quarter last year.
For the first 9 months of 2022, a total of 99 CMBS and CLO deals with a total balance of $90.6 billion were priced. This was down from 133 deals with a total balance of $100.7 billion priced in the same period of 2021.
Analyzing cash flow
Trepp analyzed the change in net cash flow between 2020 and 2021 for apartments with CMBS loans. They found that cash flow increased by 1.8 percent from year to year but that the results varied greatly by state.
Looking only at states with at least 20 properties with CMBS loans, the states with the highest increase in cash flow were New Mexico (10.3 percent), Nevada (10.2 percent), Arizona (9.7 percent) and Utah (9.4 percent). The states with the biggest drops in cash flow were New York (-7.2 percent), Washington DC (-6.4 percent), North Dakota (-5.4 percent) and California (-2.5 percent).
The report attributes at least some of the differences between states to the migration that took place from states that imposed strict COVID lockdowns to states that were less restrictive.
The full report also contains much more detailed information about specific loans under special servicing and the servicers of them. The report can be obtained here.