Nevada, Arizona CMBS delinquency rates outpacing national average
The Mountain region has a relatively high delinquency rate of 6.7 percent overall, compared to the 4.51 percent delinquency rate for all U.S. CMBS loans in January, according to Trepp. Nevada loans represent 37 percent of the region’s CMBS balance, with approximately $10.6 billion of outstanding debt. Arizona loans comprise 27 percent of the total regional loan balance, followed by Colorado loans (21 percent) and Utah loans (8 percent). New Mexico, Idaho, Montana and Wyoming loans combine for the remaining 7.5 percent.
The Mountain region of the United States encompasses Nevada, Arizona, Colorado, Utah, New Mexico, Idaho, Montana and Wyoming. More than $22 billion in outstanding CMBS features a Mountain region property as collateral, which makes up about 6.1 percent of the total private label CMBS balance in the United States.
The largest MSAs by CMBS balance within these states are Las Vegas, Phoenix, Denver, Salt Lake City, Tucson and Albuquerque. Las Vegas loans comprise 33 percent of all outstanding CMBS debt backed by Mountain region properties. The Las Vegas metro area’s economy is driven by the tourism industry, and the Bureau of Labor Statistics reports that more than a quarter of a million people (25 percent of the MSA’s population) work in hotels, restaurants, bars and casino gaming operations. Retail and lodging loans backed by Las Vegas properties combine for $8 billion, which makes up 84 percent of the MSA’s total balance of $9.5 billion.
By state, Wyoming, New Mexico and Idaho posted the highest respective delinquency rates of 17.8 percent, 13.7 percent and 12.4 percent in February. The delinquency rate fell sharply in February, as the rate has now dropped in eight straight months. The delinquency rate for U.S. commercial real estate loans in CMBS is now 4.51 percent, a decrease of 32 basis points from the January level.
A combined $2.7 million in Mountain debt matures in 2018. Nearly 40 percent of the regional balance maturing this year is backed by properties in Arizona. Nevada-backed loans make up 23.5 percent of the maturing volume, followed by Colorado (18.6 percent) and Utah loans (10.5 percent).
However, Montana has a low 2 percent delinquency rate. Utah has an even more impressive 1.5 percent delinquency rate across its $2.4 billion of outstanding loans.
Looking ahead, loans backed by Nevada properties are ones to watch, as they currently have a low weighted-average DSCR and a relatively high delinquency rate, according to Trepp. Despite shifting fundamentals in the retail sector, Nevada loans may benefit from the thriving travel and leisure industry, which can help lift loan performance up and push the delinquency rate down.
Trepp predicts that with these positive fundamentals for Colorado and Arizona loans, the Mountain region’s overall delinquency rate may retreat in the months ahead.
