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News/Releases : Real Estate & Construction
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Fitch: Commercial Property Loan Delinquencies Down
Description:
NEW YORK - (Business Wire) Delinquencies for U.S. commercial real estate loan (CREL) CDOs fell 33 basis points (bps) to 2.80% for November 2008 from 3.13% in October 2008, representing the first decline since July, according to Fitch Ratings. Fitch currently rates 35 CREL CDOs encompassing approximately 1,100 loans and 370 rated securities/assets with a balance of $23.8 billion.
'The continued lack of available capital is driving maturity defaults of CRE loans,' said Senior Director Karen Trebach. 'However, asset managers are continuing to extend many of these loans, with the extension of two large performing matured balloon loans leading to the net decline in this month's CREL DI.'
Asset managers reported 45 new loan extensions this past month compared to 35 in October. Due to the short-term nature of the loans in CREL pools, Fitch anticipates an average of 40 extensions per month to be exercised going forward, or 3.5% by number of loans in the CREL CDO universe.
As Fitch predicted earlier this year, repurchases are on the decline with none reported this past month. However, asset managers have been exercising their rights to trade credit risk assets out of CDOs at a loss. In November, an asset manager sold a recently downgraded real estate bank loan out of a CDO at 26% of the par amount. The effect to the transaction's credit enhancement, however, was minimal as the asset manager had also contributed better performing assets, which were purchased at discounts to par.
Whole loans and A-notes comprise 88% of the CREL DI. Nearly 48% of the loans in the CREL DI are collateralized by multifamily properties. As the economy worsens, Fitch anticipates a rise in delinquencies, with the most risk attributed to loans backed by hotel and retail properties. These property types make up over 25% of the total universe of loans in Fitch rated CREL CDOs. Currently, hotel properties comprise 18.6% of the loans in the CREL DI with retail properties comprising 8.3%.
The CREL DI includes loans that are 60 days or longer delinquent, matured balloon loans, and the current month's repurchased assets.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Reply to: sandro.scenga@fitchratings.com
Date: 12/15/2008 4:30:23 PM
Contact:
Sandro Scenga
Fitch Ratings
212-908-0278
sandro.scenga@fitchratings.com
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