Aaron Bryson

Five CMBS Case Studies

Five easy to digest CMBS narratives courtesy of the BarCap CMBS team, which highlight why "extend and pretend" in the commercial real estate arena is doomed to fail, and why the longer the pain is postponed, the greater the ultimate loss to all stakeholders involved. The administration and the Fed are rushing against the value evaporation/debt inflation clock, and losing. The five properties detailed:

Shutters on the Beach & Casa Del Mar

The Belnord

Columbia Center

Schron Industrial

Tustin Legacy

October CMBS Performance Worsens, Loan Backing Union Square W Hotel To Default Imminently

"Credit performance for CMBS worsened at an accelerated pace this month versus the recent trend. Thirty-plus day delinquencies across the fixed rate universe increased by 41bp, to 5.50%, partly owing to the deterioration of loans that were current but transferred to the special servicer last month. This compares with the trailing three month average of 34bp. The trend of accelerating delinquencies is expected to continue throughout 2009 and early 2010, given the long lag times associated with commercial real estate." - Barclays

Charting Too Big To Fail

The recent addition of legacy loans to TALF caused CMBX spreads to turn on the nitrous and rip like all the commercial real estate concerns over the past 6 months have disappeared (especially in the top-most AAA tranche). Between financials, whose stocks have doubled on average, and CMBX (whose spreads have halved), there is, at this point, no doubt as to what lengths the administration is willing to go to funnel every single printed dollar into these otherwise doomed industries.