Fitch: US CMBS continue to default at a record pace (10.6% In 3Q ) "Trick or REIT"

"Trick or Treat REIT

'Loans continue to default at a record

pace, with large loans driving the trend,'

said Fitch Managing Director Mary MacNeill.

'Hotel and office properties were the largest

contributors to defaults this past quarter.'

(Q3 2010 default rate up 61% since Q4 2009)

By Matt Jarzemsky (Dow Jones Newswires)

The Wall Street Journal
10/22/10
The default rate for loans in U.S. commercial mortgage-backed securities increased to 10.6% in the third quarter as debt continued to sour, Fitch Ratings said Friday.

The rate at the end of the third quarter was up from the second quarter's 9.48% and 6.59% at the end of last year, the rating agency said.

Commercial real estate has been pummelled as occupancy rates and rents languish, pressuring property owners. The sharp drop in property values has left landlords often reluctant or unable to sell their properties to repay loans.

So far this year, $21.66 billion in such loans have defaulted, up from $17.75 billion for all of 2009, the rating agency said Friday. The number of loan defaults, 1,452, was nearly equal to last year's 1,464.

Loans originated in 2000 and 2005 each saw third-quarter default rates increase more than 1 percentage point from the spring--commercial property debt often has a five- or 10-year term--as did loans made in 2007, the height of the market's frenzy.

Hotel and office properties had the biggest increases in defaults, rising 2.86 and 1.15 percentage points, respectively.

Fitch currently has $26.9 billion of its fixed-rate commercial mortgage-backed securities on watch for downgrade and has a negative outlook on an additional $42 billion.