Two-Thirds of November's $4.42 Billion in Maturing CMBS Debt Can't Refinance in Full, Trepp Says

About $4.42 billion of commercial real estate debt packaged into private-label commercial mortgage-backed securities (CMBS) reaches its final, or "hard," maturity in November 2026, and more than two-thirds of that balance could not be refinanced at its current size under today's lending terms, according to an analysis published on Nov. 12 by data provider Trepp.

Trepp estimated that borrowers would have to put about $804.7 million of new cash into those properties to close the gap, equal to 18.2% of the month's maturing balance. The findings, also summarized by CRE Daily on Nov. 13, arrive as higher long-term interest rates continue to squeeze owners of hotels, shopping centers and office buildings that financed their properties years ago at much lower coupons.

Who owes what

The November cohort covers 201 loan pieces on 182 whole loans. Hospitality is the largest slice at $1.16 billion, or 26.24% of the total, followed by retail at $1.13 billion and office at $970.9 million, Trepp said. Mixed-use properties account for $564.3 million and multifamily for $297.4 million, while industrial, self-storage and manufactured housing make up much smaller amounts.

Most of the debt is still paying on time. Trepp classified $4.26 billion, or 96.41% of the cohort, as performing. The non-performing balance totals $158.6 million across six loan pieces on four properties, and a single California mall accounts for $145 million of it, or roughly 91%. The rest is spread across smaller loans backed by an office condominium in New York, a mixed-use property in Detroit and a multifamily property in Charlotte, North Carolina.

Even so, $1.66 billion of the maturing debt, or 37.62%, sits with special servicers, the firms that take over loans when borrowers run into trouble. Retail shows the most immediate payment stress, with a 12.83% delinquency rate, while mixed-use has the highest share in special servicing at 67.56%.

How the refinancing gap was measured

To test whether each loan could be replaced, Trepp sized a new loan on each property's current net cash flow at a 1.35 times debt service coverage ratio, using its own indicative all-in lending rates as of Oct. 23, which ranged from 6.44% to 7.11% depending on property type. By comparison, the fixed-rate loans in the cohort, about 80% of the balance, carry a weighted average coupon of 4.14%.

At those rates, Trepp said, a loan needs a debt yield of roughly 8.7% to 10.9% to refinance at its current balance. More than half of November's maturing balance, 51.94%, has a debt yield below 8%, and 27.49% sits below 6%. As a result, 68 of the 182 whole loans, holding $3.05 billion or 68.9% of the cohort, would need additional equity.

Hospitality has the thinnest cushion. About 79.31% of its maturing balance has a debt yield below 6%, and Trepp put the sector's refinancing gap at $341.6 million, the largest of any property type. Retail's gap was estimated at $148.6 million, office at $119.9 million and mixed-use at $119.8 million.

Maturity does not mean payoff

Trepp's review of the three previous monthly cohorts showed that loans that are current on payments often still fail to pay off on time. Between 96.4% and 99.1% of the August, September and October 2026 cohorts were performing at maturity, yet only 36% to 41% of each had been fully repaid by the October remittance. Others were extended, kept paying after passing their maturity dates, went unpaid or became delinquent. Trepp cautioned that the October group is the least settled because it has had only one reporting period since maturity.

The firm also noted that many loans scheduled to mature in November were repaid early. Based on September data, $7.97 billion had been scheduled to come due this month, but $4.2 billion paid off in the October remittance. About $675 million then joined the cohort, nearly all of it from loans that had passed their maturity dates without paying off but were still reported as current.

Broader distress readings

The maturity report follows other October readings from Trepp. The firm said on Nov. 9 that its CMBS special servicing rate rose 25 basis points to 11.74% in October, the highest since December 2012, with lodging accounting for 37% of the $3.01 billion of loans transferred to special servicing during the month. The office special servicing rate fell 25 basis points to 16.60%, while the lodging rate rose 122 basis points to 10.17%.

Trepp's overall CMBS delinquency rate moved the other way, falling 15 basis points to 7.87% in October from 8.02% in September, largely because a $975 million loan backed by showroom properties in High Point, North Carolina, and Las Vegas returned to current status. Office delinquencies still rose 17 basis points to 12.33%, and retail delinquencies increased 63 basis points to 7.21%.

Trepp said the five largest loans in the November cohort total $1.60 billion, or 36.23% of the pool. How many of this month's loans pay off, extend or move into special servicing will show up in the November and December remittance data.