Key Takeaways

  • According to Trepp data, non-agency CMBS multifamily loans in Maysaw the delinquency rate drop 76 basis pointsto 6.95%, the largest decline among commercial real estate sectors that month. Six months ago, the rate was 6.98%; a year ago, it was 6.11%.
  • According to Trepp,the multifamily specially serviced rate also improved, falling 57 basis points in May to 8.51%. Six months ago, it was 8.15%; a year ago, it was 8.42%.
  • Trepp's overall commercial real estate CMBS delinquency rate edged up 1 basis point in May to 7.55%, with the five largest newly delinquent loans that month all coming from sectors other than multifamily. Industrial rose 35 basis points to 1.31%, and retail rose 30 basis points to 6.61%. Office fell 16 basis points to 11.53%, and lodging fell 51 basis points to 6.01%.

Deeper Dive

According to Stephen Buschbom, director of applied research and analytics at Trepp, the improvement in the non-agency CMBS multifamily delinquency rate was driven primarily by the cure of two large multifamily loans, meaning those loans returned to performing status from non-performing status in May.

"The largest of these was The Cove at Tiburon, a $210 million loan secured by a 283-unit garden-style apartment community in Tiburon, California," Buschbom said in an email comment. "The second-largest cure came from a private-label CMBS deal, so Trepp cannot disclose loan-level details for that asset."

The property backing the The Cove at Tiburon loan is a 33-building complex in Tiburon, California. The loan was placed ona watchlistin January 2025 due to its upcoming maturity. According to Morningstar Credit, the waterfront property was originally built in 1967 and renovated in two phases between 2014 and 2018.

Although both the servicing rate and delinquency rate for multifamily improved in May, Buschbom noted that changes in these two metrics are not necessarily directly correlated.

"There is a connection between delinquency and special servicing, but they don't always move in tandem. A loan can be performing but still managed by a special servicer, and the cure of a delinquent loan doesn't necessarily mean it will immediately exit special servicing," Buschbom said.

Trepp's overall commercial real estate CMBS specially serviced rate fell 51 basis points in May to 10.86%, driven mainly by one office loan returning to the master servicer. The office specially serviced rate fell 91 basis points to 16.75%, lodging fell 121 basis points to 8.45%, and mixed-use fell 59 basis points to 11.62%. Industrial rose 5 basis points to 1.28%, and retail rose 1 basis point to 13%.

However, the overall figures may mask some problems beneath the surface. "May still saw a steady number of mid-sized office loans enter special servicing, along with multifamily portfolios, industrial assets, and some lodging properties, indicating that distress remains broadly distributed despite improving headline metrics," Trepp said.

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