NEW YORK CITY—For an indication of the continued good health, relatively speaking, of post-downturn CMBS transactions, there's S&P Global Ratings' updated loss projections for the US and Canadian conduit/fusion and single-borrower/large-loan deals that it rates. Near-term expected losses for all deal types remain the most pronounced within 2007 and 2008 vintages, while at the other end of the spectrum, only three vintages of the CMBS 2.0/3.0 universe have registered any type of pooled realized loss to date.

The three-highest realized loss percentages are represented by the lons that were securitized in the high-volume peak years of the previous cycle: 2006 (7.7% loss percentage), '07 (7.3%) and '08 (10.3%). Since '07 and '08 vintages haven't fully experienced bulk loan maturities, these numbers could see marked increases depending on how well the market absorbs the mass of upcoming loan product. “Overall, the '06 vintage conduit fusion transactions are expected to have higher losses at 10.0% than the 9.7% expected six months ago, while the 2007 vintage conduit fusion transactions are expected to have lower losses at 12.0% than the 13.7% expected six months ago,” says Tamara Hoffman, S&P Global Ratings credit analyst.

By property type within within the current S&P-rated transactions, office has incurred the highest realized losses to date at 5.2%. The ratings agency expects multifamily, currently with 3.5% in realized losses, to experience the lowest total projected losses at 4.2%. “We expect the office segment to have the highest total projected losses at 7.5% because of 1.3% near-term expected loss and an additional 1.0% base expected loss,” according to S&P.

In related news, S&P on Friday said that May marked the third consecutive month of decline in “starting” pay-off rates for loans in rated CMBS transactions coming due in 2017. S&P Global Ratings' latest CMBS Maturity Tracker cites 3,150 loans with an original balance of $55.7 billion remain outstanding that are due to mature this year. Of these, 31.0% are current, 40.5% are on the master servicer's watchlist and 20.4% are being specially serviced, S&P says.

For June, there are 470 S&P-rated loans with an original balance of $7.2 billion outstanding that are scheduled to mature. Of those, 61 loans totaling $1.9 billion currently remain with the special servicer.

By property type, the $7.2 billion in maturities include $2.0 billion for office, $1.9 billion for retail, $1.6 billion for multifamily, and $0.9 billion for lodging. Office properties continue to be a focus, as they contributed to the highest overall liquidation rate year to date (for May 2017 loans), although overall loss severities were moderate at 32%.

Of the loans that reached maturity in May, 150 with a total original balance of $4.23 billion have liquidated, for a total loss of $1.36 billion, or a 32.0% severity. Of the 10 largest loans that liquidated, seven were backed by office collateral.

In addition, S&P says that legacy multifamily loans from '07 transactions with troubled histories and high balances pushed the balance of top 10 loans scheduled to mature in June to $2.0 billion. That's up from $0.9 billion in May.

Instant Insights /

'07, '08 Vintages Loom Large for CMBS Losses

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