Thursday, October 13, 2011

Fitch: U.S. CMBS Losses Fell in 2010; Outlook for 2012 a Question Mark

NEW YORK, NY -- While special servicers made more tangible progress in stemming U.S. CMBS losses this past year, current economic uncertainty makes the outlook for next year more uncertain, according to Fitch Ratings in its latest annual U.S. CMBS loss study.

Nearly four times as many loans were resolved by special servicers in 2010, with 1,427. Additionally, the average loss severity declined to 53.4% compared to 57% in 2009.  'Special servicers have been increasingly successful selling properties and working with borrowers for discounted loan payoffs,' said Senior Director Britt Johnson.

However, current economic uncertainty makes it more difficult to predict 2012 numbers. 'If the current  economic volatility continues, special servicers may struggle to find borrowers capable of obtaining capital for distressed real estate,' said Johnson.

Drilling down into specific property types, loss severities fell for all major property types except retail. However, Fitch expects the cumulative loss severity in 2011 to continue eclipsing historical averages, which increased to its highest level ever at 42.9% in 2010.

Losses on retail and multifamily loans will remain volatile. Elsewhere, office losses will trend north of historical averages in spite of recent improvements in some regional markets. 'With leases set to expire in a weaker economy, office landlords will have to continue lowering rents and paying for tenant improvements and rent concessions,' said Managing Director Mary MacNeill.

Though performance among hotel properties has improved notably in recent months, they still hold the second highest amount of defaults. 'There are still many delinquent hotel loans to resolve, though dispositions will slow next year if the lending environment tightens,' said MacNeill.

Fitch's 'U.S. CMBS Loss Study: 2010' is available at '' under 'Latest Research' or by clicking on the above link.


Britt Johnson
Senior Director
Fitch Inc., 70 W. Madison St., Chicago, IL 60602

Mary MacNeill
Managing Director

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