Heading Towards Default, an Update on the Commercial Real Estate Outlook...
JUNE 1 2012
SELECTED FINDINGS FROM THE Q1 2012 BANK CRE DEFAULT AND LENDING REPORT
AND QUARTERLY BANK LEAGUE TABLES
Even as the delinquency rate on legacy CMBS loans hits new highs, commercial real estate's drag on the nation's banking system continues to ease. Chandan's independent analysis of first quarter call report data shows the default rate on banks' commercial real estate and multifamily mortgages fell to 3.45 percent, the lowest level since mid-year 2009. Bolstered by rapidly improving fundamentals and a relative abundance of low-cost financing, the apartment default rate dropped to 2.36 percent, half its peak level. The default rate on commercial property loans is declining at a slower pace, reflecting the mixed recovery in cash flow and value trends in the office, retail, and industrial sectors.
Q1 2012 Bank Default and Lending Review
Selected Report Highlights
60 Percent of Banks Report Apartment Improvements
A clear majority of significant multifamily lenders reported lower default rates in the first quarter. Across this group, the median decline in the multifamily default rate was 80 basis points. For banks reporting lower commercial property default rates, the median decline was 50 basis points.
Falling CRE Distress on Bank Balance Sheets
Banks' non-performing commercial and multifamily balances fell to $54.3 billion in the first quarter, down 27.1 percent from the peak level of distress. Multifamily distress has fallen by almost half from its high-water mark.
Apartment Lending Rises at Stronger Banks
Net commercial property lending fell $3.1 billion during the first quarter while multifamily lending increased by $2.4 billion. Banks with lower default rates on legacy loans drove new financing. The median default rate was 0.8 percent at banks that increased their multifamily lending and 1.6 percent at banks that cut their exposure.
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