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CMBS Rating Actions Show Greater Stability, But Headwinds Pose a Concern

Fitch Ratings said its North America CMBS rating actions in the second quarter demonstrated continued stabilization with property cash flows recovering from their pandemic lows, higher recovery prospects on specially serviced loans with improved valuations, more loans being resolved and returned to the master servicer, and better than expected recoveries on dispositions.  

However, the rating agency says, “deteriorating macroeconomic conditions and rising headwinds may slow the post-pandemic recovery.” 

The vast majority of rating actions in 2Q22 were affirmations at 94% (2,254 classes of CMBS), up from 91% in 2021 and 85% in 2020. Few downgrades (4%; 86 classes) occurred and no Negative Watch rating signals were assigned in the quarter. Only two affirmed classes (0.1%) with prior Stable Outlooks had them revised to Negative, says Fitch. 

All the downgraded classes had previous Negative Outlooks or already had a distressed rating prior to the downgrade. Approximately 86% of downgrades were concentrated in below-investment-grade classes. Investment-grade downgrades were limited to five transactions driven mainly by a greater certainty of higher losses from lower-tier regional mall exposure

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About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and GlobeSt.com at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).

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