The refinance market for commercial mortgages remains strong, reported Morningstar Credit Ratings LLC, New York, and the payoff rate for loans backing commercial mortgage-backed securities (CMBS) rose to 87.6 percent in April.
The CMBS payoff rate hit a low for 2015 of 81.1 percent in March, Morningstar said. Of the 384 performing CMBS loans totaling $4.3 billion scheduled to mature in April, 323 loans with an unpaid balance of $3.76 billion matured and paid off as scheduled.
"While the year-to-date results [an 86.4 percent payoff rate] show impressive refinance demand for maturing loans, a still-significant portion of aggressively leveraged legacy loans made between 2005 and 2007 affected by poor underwriting and a sharp decline in cash flow during the crisis are unable to be refinanced," Morningstar said.
The largest loan that failed to pay off in April was the $133 million Galleria at Pittsburgh Mills loan, which matured and became delinquent with respect to monthly payments. The loan, secured by 887,000 square feet of a 1.1-million-square-foot regional mall outside of Pittsburgh, lost its largest tenant--a Sears anchor store--in January, and Morningstar projects a $68.3 million loss for the loan.
Meanwhile, Trepp LLC, New York, said its CMBS delinquency rate calculation inched lower in April, falling a single basis point to 5.57 percent. April's delinquency rate represents an 87-basis-point drop...