Delinquency rate hits high for securities

Delinquent or defaulted commercial mortgage-backed securities, or CMBS, reached 21.3 percent in December for metro Atlanta, an all-time high, according to Trepp LLC, a real estate research firm.

With a $12.8 billion CMBS balance outstanding, $2.73 billion was 30-plus days delinquent or worse — compared with 13.2 percent the previous December.

Contributing to the increase, the owners of the Discover Mills shopping mall in Lawrenceville recently missed a $135 million loan payment.

Trepp said CMBS delinquencies nationwide increased in December to 9.58 percent, up from 9.2 percent a year ago. December was the third increase in the past four months.

Major banks, life insurance companies and investment banks are among the other common commercial property lenders, but CMBS, which typically make higher leveraged loans at high interest rates, became popular during last decade’s boom.

The Trepp report does not include delinquencies of other loan types.

Some commercial real estate entities had viewed last year and this year warily.

The timing of recent delinquencies and defaults partly has to do with the market conditions and timing of when the loans were made, said Stewart Calhoun, executive director of the capital markets group at Cushman & Wakefield in Atlanta.

The peak of the commercial real estate market was 2006 and 2007, both in terms of number and price of deals. Many CMBS loans were five-year loans, often with bulk payments of the principal due at maturity.

In the boom years, many borrowers and lenders expected refinancing would be relatively easy as property values grew. But values didn’t, and the economy flopped.

Properties that have lost tenants, or ones renting to tenants at reduced rates, often can’t generate the funds needed to pay off debts.

Properties also aren’t worth what they were at the peak, and borrowers are walking away, while others hoping to retain control have to come up with vast sums of new equity or make other concessions.

Many borrowers and lenders are trying to stave off failure by coming to new loan terms, reducing principal or extending maturity.

“I think a lot of lenders and borrowers have worked as hard as they can to work together to keep projects alive,” Calhoun said.

But many projects likely will be foreclosed or otherwise surrendered by borrowers.

At the same time, fewer individual metro Atlanta properties were listed as delinquent — 175 last month compared with 201 in December 2010 — but they carried larger debt.