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National  + Distressed Assets  | 
Fifty-seven percent of the 1,302 high-loss CMBS loans analyzed by Kroll Bond Rating Agency were originated between 2005 and 2007

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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About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 16-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 7-10 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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