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More Unsolicited SF Comments are Likely due to Late-Cycle Behavior

Late-cycle credit behaviour is manifesting in securitisations more frequently of late, which has triggered more unsolicited commentaries from Fitch Ratings on structured finance deals not rated by the agency and in certain sectors, according to the rating agency in a new report.

Fitch-Rated U.S. CMBS Can Absorb $3B Hurricane Michael Exposure

Negative rating actions are unlikely for roughly $3.4 billion of Fitch-rated U.S. CMBS with exposure to properties in Florida and Georgia affected by Hurricane Michael last week given servicer advancing, insurance coverage typical of CMBS loans and strong sponsorship among the larger affected properties, according to the rating agency's latest weekly U.S. CMBS newsletter.

U.S. CMBS Delinquency Rate Dips Further in September

Strong new issuance volume, along with steady loan resolution activity and minimal new delinquencies, fueled the fifth consecutive month of decline in the U.S. CMBS delinquency rate, according to the latest index results from Fitch Ratings.

NOI Growth Decelerates Across Property Types in U.S. CMBS

Property type NOI growth continues to decelerate in U.S. CMBS, according to Fitch Ratings in its latest weekly U.S. CMBS newsletter. NOI for properties securitized within Fitch-rated U.S. CMBS conduit deals rose again last year by 1.9%. However, Fitch observed a continuation of the trend of slowing growth over the last four years.
 

Virtual Investor Series 2018

Global Virtual Investor Meeting Videos

This series features senior analysts across our structured finance teams answering the questions we regularly address in one-on-one investor meetings. It covers overall market trends, specific transaction performance, and broad economic issues to give you the insights and perspective you’d get at one of our in-person meetings.

 

Watch the Videos

 

Elizabeth Finance 2018 DAC Lacks 'AAAsf' Protection

Elizabeth Finance 2018 DAC exposes noteholders to a concentrated portfolio of secondary quality regional UK properties financed by two loans. The CMBS cannot support 'AAAsf' or 'AAsf' ratings, regardless of leverage, particularly given that repayments from refinancing borrowers will be repaid to note classes on a pro-rata basis (according to DBRS's presale report).

Rise of IO Loans in New U.S. CMBS Drawing More Scrutiny from Fitch

Interest only (IO) loans in new U.S. CMBS deals receive harsher treatment by Fitch Ratings to help stem the risk of higher defaults and losses, as detailed in a new report.

US CMBS Delinquencies Will Decline by Year End

The US commercial mortgage-backed securities (CMBS) delinquency rate is expected to finish 2018 between 2.25% and 2.75%, Fitch Ratings says. Strong new issuance activity, performance stability of CMBS 2.0 loans, the small volume of maturities for the remainder of 2018 and continued resolution activity by special servicers will all contribute to keeping delinquencies in this low range.

EMEA CMBS

Euan Gatfield, discusses the continued developments in the European CMBS market, exploring the asset types and jurisdictions likely to have an impact on deal activity. According to Euan, the Private Rental sector is the one to watch

U.S. CMBS is a Market Operating in ‘Dog Years’

The U.S. commercial real estate cycle is nearing the end of its customary 10-year cycle, though Huxley Somerville, US CMBS Group Head, says certain developments are making it resemble a cycle more at its midway point.

Watch the rest of our Virtual Investor Meetings

Teleconference

Update on US Life Insurers’ Exposure to Commercial Real Estate

Fitch Ratings hosted a teleconference to discuss key findings in the recently published update report on US Life Insurers’ Exposure to Commercial Real Estate.

Heavier Pro-rata Pay Accentuates EMEA CMBS Asset Idiosyncrasies

The uptick in EMEA CMBS issuance in recent months has seen heavier use of pro-rata principal allocation, which creates risks that can be disguised by prudent senior note-to-value ratios. Consequently, and as CMBS expands to include more operating assets, it becomes more important to look through headline leverage into the details of individual loans and properties.
 

Loss Severities Drop; Resolutions Shorten for U.S. CMBS in 2017

Against a backlog of maturing loans from the 2007 vintage, last year yielded a respite for U.S. CMBS loss severities, according to Fitch Ratings in its latest annual U.S. CMBS loss study.
 

Underperformance of Class B Malls a Lingering 'Concern' for U.S. CMBS 2.0

Nearly 75% of the Fitch-rated CMBS 2.0 classes that have a Negative Rating Outlook are tied to retail concerns. Fitch has designated 55 CMBS 2.0 loans totaling $3.7 billion secured by underperforming regional mall and outlet properties as Loans of Concern through the end of last month.
 

Structured Finance Faces LIBOR Coordination Risk

Stronger provisions in transaction documentation ahead of LIBOR's discontinuation are an important step to limit the number of legacy structured finance (SF) contracts, Fitch Ratings says. However, much still needs to be done before the end of 2021 when forced LIBOR panel participation will end.

Brief Uptick for US CMBS Delinquencies in April

The US CMBS delinquency rate posted a brief, but small uptick in April, mainly due to a large balance Chicago office loan becoming delinquent, according to the latest index results from Fitch Ratings. Loan delinquencies increased one basis point (bp) in April to 2.97% from 2.96% a month earlier. The last time the delinquency rate reported an increase was in June 2017.

T-Mobile/Sprint Merger Could Hurt Revenues for U.S. Cell Tower CMBS

The announced merger between T-Mobile and Sprint has the potential to reduce future revenue in outstanding U.S. CMBS wireless tower securitizations, according to Fitch Ratings in its latest weekly U.S. CMBS newsletter.
 

Student Housing Remains a Laggard for US CMBS 2.0

Though a fairly small piece of US CMBS 2.0 transactions, performance of student housing properties continues to lag other property types. Student housing properties have historically fared worse than traditional multifamily properties. With delinquencies increasing over the last couple of months, student housing delinquencies are now four times higher than multifamily properties.

Toys 'R' Us Highlights Single Borrower US CMBS Risks

The effect of Toys 'R' Us' announcement that it will close all 735 of its stores on CMBS transaction TRU Trust 2016-TOYS is a prime example of how retail pressures can affect credit outcomes and how CMBS transactions can avoid risks. RelatedToys "R" Us, Maplin Do Not Impact our CMBS Ratings

What if US CMBS Leverage Rises Again?

'Leverage is the most powerful predictor of a commercial real estate loan's performance,' said Senior Director Ryan Frank. 'As such, modeled losses will be higher and credit enhancement levels will likely rise if leverage in CMBS loan pools increases.'

rating action

Pietra Nera Uno S.R.L. Expected Ratings Assigned; Outlook Stable

The transaction is a securitisation of three commercial mortgage loans totalling EUR403.8 million to Italian borrowers sponsored by Blackstone funds. The loans are all variable rate (with variable margins) and secured on Italian retail assets: a shopping centre (Palermo loan); two fashion outlet villages (Fashion District loan); and another fashion outlet village (Valdichiana loan).

What to Watch in 2018

Outlook compendium for North American Commercial Property

Hotel Oversupply Raising US CMBS Loan Concern

We have seen an increase in the volume of hotel loans transferring to special servicing and performance metrics in seven of the top US metropolitan markets are under pressure by oversupply. However, we expect revenues across the broader US market to grow through the end of 2018, albeit slowly, and the impact on CMBS to be limited this year.

US CMBS Delinquencies

Latest headlines and research.

Amazon Retail Gain Could Impact REITs & CMBS

Fitch’s retail, REITs and CMBS analysts discuss what would happen to these sectors if Amazon hypothetically gained significant market share in apparel.

Related: Severe US Retail Shock Could Fan Out to REITs, CMBS

Credit Hotspot: Brexit

Latest: Brexit, Rates are Key Risks for London Offices

Severe US Retail Shock Could Fan Out to REITs, CMBS

A hypothetical rapid rise in Amazon's US apparel market share could have significant credit implications for existing retailers, REITs and CMBS transactions. Sharp declines in retailer revenue and margins and accelerated store closings would likely drive significant cash flow erosion and weaken credit profiles.

Presale & Focus Reports

Presale Reports offer timely details on the structure and characteristics of proposed CMBS transactions.

Focus Reports offer updated performance statistics and detailed commentary alongside deal rating actions.

hurricane impact

US CMBS Servicers Respond To Hurricanes Harvey & Irma

US CMBS servicers are already taking steps to assess damage, payment delays and insurance disbursements brought on by Hurricanes Harvey and Irma. Damage from Hurricane Harvey along the Texas Gulf Coast potentially affects some $10.4 billion of loans in Fitch-rated US CMBS. 

Fitch Virtual Investor Meeting

B-Class Malls a Primary Focus for US CMBS

With retail a lingering thorn in the side of the broader markets, investors are focusing on the health of B-class malls and their viability in new CMBS deals.

EMEA Structured Finance Losses Remain Very Low

Total losses of just 0.25% have been realised on the EUR3.23 trillion of Fitch-rated EMEA SF notes issued between 2000 and 2016.
Structured Finance Losses: EMEA 2000-2016 Issuance - Excel File

Scotsman Guide

The CMBS Market is Adjusting to the Times

In this wide ranging Q&A, Mary MacNeill Managing Director at Fitch Ratings discusses numerous broader challenges the CMBS sector is facing, among them the 2017 loan maturity wall and continued retail sector struggles.

Shared Workspaces Could Shrink Central London's Office Market Value by 25%

Working remotely from suburban shared workspace allows savings to be unlocked for service sector employers and their employees but could see the value of central London's office market fall by as much as 25% over 10 years.

Special Report

US CMBS Retail Exposure Bears Scrutiny

Ongoing struggles of shopping malls throughout the country could put some pressure on some U.S. CMBS deals that came to market between 2011 and 2013,.

teleconference

Countercyclical Approach to UK CRE Boosts Loan Returns

Capping UK commercial real estate lending at 70% of the property's cyclically-corrected value can protect lenders from half of portfolio losses. 

Contacts

Ben McCarthy

APAC

Ben McCarthy

Analytical

+61 2 8256 0388

Vickie Brumwell

APAC

Vickie Brumwell

Business

+61 2 8256 0305

Euan Gatfield

EMEA

Euan Gatfield

Analytical

+44 20 3530 1157

Nigel Green

EMEA

Nigel Green

Business

+44 20 3530 1507

Huxley Somerville

North America

Huxley Somerville

Analytical

+1 212 908 0381

Zanda Lynn

NORTH AMERICA

Zanda Lynn

Business

+1 212 908 0601