The first U.S. CMBS 2.0 loan defaults have surfaced, though they were driven by idiosyncratic events and do not appear to be the start of prolonged rising defaults, according to Fitch Ratings in a new report.
Nine loans totaling
"The largest CMBS 2.0 default occurred when a major office tenant vacated before their lease expired," said Sutherland. "The multifamily CMBS defaults were mostly on smaller properties that, despite adequate property performance, were chronically late with payments possibly because of organizational problems at the sponsor level."
Fitch identified an additional 12 CMBS loans totaling
Despite these outliers, the rate of CMBS 2.0 defaults should remain low. Whereas the average annual default rate for CMBS 1.0 (excluding 2005-2007 deals) is roughly 0.7%, the CMBS 2.0 default rate comes in at less than 0.02%. That number stands to slowly increase with higher leverage and more aggressive underwriting taking hold in recent months. A bigger concern over time, however, will be balloon risk. 'If interest rates are substantially higher when the CMBS loan matures, refinancing is likely to be more difficult unless there is some appreciation in cash flow,' said Sutherland.
'First Defaults Appear for Recent Vintage CMBS' is available at 'www.fitchratings.com' or by clicking on the above link.
Additional information is available at 'www.fitchratings.com'.
Huxley Somerville, +1 212-908-1381
Managing Director, Head of U.S. CMBS
Source: Fitch Ratings
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