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Soundview Real Estate Partners Responds to Grim CMBS ReportIn April, Trepp, LLC Reported a Sharp Increase in CMBS Delinquency Rates, a Report That Garnered the Attention of Many Real Estate Investors -- Including Stamford-Based Soundview Real Estate Partners (May 23, 2012)
STAMFORD, CT -- (Marketwire) -- 05/23/12 -- Trepp, LLC is the leading provider of information and analytics to the CMBS, commercial real estate, and banking markets -- and a recent report, filed in April, has caught the attention of many within those different industries. The Trepp report, reflecting data current as of March 2012, showed a sharp increase in CMBS delinquency rates. The report received attention from many investors and real estate professionals, among them the Stamford-based private equity real estate company Soundview Real Estate Partners.
In fact, the report was so provocative that it prompted Soundview to release a press statement on the state of their industry, as reflected in Trepp's numbers. "Unfortunately, I believe we will see continued upward pressure on CMBS delinquency for a least the next 36 months," predicts Soundview Real Estate Partners President Nick Newman. "In the US, approximately $600 million in new CMBS was issued between 2005 and 2007. Most of these loans had 7-10 year terms and many had little or no amortization of principal during the loan term. I would expect that well over half the maturing loans in the CMBS world will not be candidates for new financing without a significant equity infusion.
Newman's overall assessment of the situation is grim. "Although people don't want to really talk about it, we feel the CMBS default rates will get considerably worse before they get better." This prediction may seem bleak, but it finds support in the numbers reported by Trepp. According to their reporting, the delinquency rate for U.S. commercial real estate loans in CMBS jumped 31 basis points during the month of March, bringing it to 9.68%. The total value of delinquent loans now totals more than $51 billion.
Newly delinquent loans, encompassing more than $5 billion in total, were responsible for 91 basis points of upward pressure, the report continues. The worst-performing loans, meanwhile, were for multifamily and office properties. The office delinquency rate increased by 37 basis points, reaching an historic high point of 9.41%. The hotel delinquency rate, however, was the only major property type to improve. It fell by 42 basis points, the Trepp report found.
The report also found that loss resolutions were relatively modest, something that affirms the prediction of ongoing tumult made by Soundview Real Estate Partners. At around $1 billion, the number was decidedly lower than what the CMBS market has seen in recent months.
Manus Clancy, one of the directors of the Trepp report, likewise affirms the predictions of Soundview Real Estate Partners. "We predicted late last year that the delinquency rate would rise largely on the impact of 2007 loans coming due, and today's report underscores that forecast," he says.
Soundview Real Estate Partners was formed in January 2003 as an expansion of the real estate investment platform established by company President, Nicholas Newman. The company, led by Newman and Vice President Benjamin Marcus, uses a joint venture-driven investment model built on an established network of local and regional real estate operators. Since 2003, Soundview has invested over $250 million in equity in over 70 separate transactions and combined real estate valued in excess of $2 billion. For more information about Soundview Real Estate Partners visit www.soundviewre.com.
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