KBRA Sees Clear Patterns in High-Loss CMBS Loans
Among CMBS loans that have suffered high loss severities—i.e. losses greater than 80%—there are recurring themes, says Kroll Bond Rating Agency (KBRA). Vintage is one such theme: 57% of the 1,302 high-loss loans analyzed by KBRA were originated between 2005 and 2007, “reflecting the cohorts’ relatively weaker underwriting standards.”
In addition, loans that were resolved during and in the aftermath of the 2007-2009 global financial crisis also had a larger share of high loss loans, KBRA says. Further, many high-loss loans were secured by properties with an operating component, such as lodging and healthcare, as well as assets in less liquid property markets.
Partial-term interest-only loans were also well represented in the high loss population. “While loan size and loan-to-value were also factors, high loss loans exhibited fairly even distributions relative to these metrics, implying that the manifestation of idiosyncratic risks that is typical in commercial real estate, such as loss of tenancy and imbalances in submarket supply and demand, may have been responsible in many cases,” KBRA reports.
High-loss loans represent 12.9% of the 10,128 CMBS loans that have been resolved with losses, according to KBRA.
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