Recently the CoStar Group performed an analysis on the commercial mortgage backed securities market (CMBS). Historically CMBS loans have been fairly insulated from market flux because of their diversified portfolios. In 2008, distressed CMBS loans were at a historic low (less than 1%) as compared to distress in commercial bank and thrift loans (2.32%). Yet some analysts believe this CMBS solidity may be eroding based on the recent CoStar review. CMBS loans placed in “special servicing” (some indication of delinquency) rose drastically in the last quarter of 08, increasing by about $1.2 billion (from 400m to 1.6b). Accounts with identifiable credit issues also nearly doubled.
According to CoStar’s research, $8.2 billion in CMBS loans were in some sort of delinquency (1,200 loans). They also identified 6,100 additional loans with a flag for credit concerns ($57.8 billion). A surprising trend in the list was the states in which trouble is quickly arising. CoStar expected to see problems in dense commercial centers yet the statistics appear to more closely reflect trouble in those states where residential housing is already in crisis, at least for now:
Data Source: CoStar.com
State, No. of Delinquent CMBS Loans
Texas, 171
Florida, 126
Michigan, 83
California, 81
Georgia, 71
Ohio, 71
New York, 70
Nevada, 42
Arizona, 39
Illinois, 34
State, Number of Potential Problem Loans
Texas, 890
California, 741
New York, 445
Florida, 432
Ohio, 269
Michigan, 247
Georgia, 219
Arizona, 212
Illinois, 180
Pennsylvania, 180
Delinquencies do appear to be fueled by the housing recession with multifamily loans being hit hardest in those areas. The overall assessment was that while CMBS loans remained fairly insulated throughout most of 2008, they will be exposed in 2009. Wall Street predicts a 300% increase in delinquencies this year.