New commercial mortgage-backed securities (CMBS) defaults in 2011 were considerably lower than new defaults in 2009 and 2010, as performance for most property types stabilized during the year, according to new data compiled by Fitch Ratings, which expects the cumulative default rate to reach 14.5% by the end of this year, based on both expected levels of defaults and new issuance.
According to the ratings agency, CMBS annual defaults in 2011 were down 38% from 2010. In total, 950 loans totaling $13.7 billion defaulted for the first time in 2011, compared to 1,477 loans totaling $22.1 billion in 2010 and 1,464 loans totaling $17.7 billion in 2009.
Cumulative defaults in 2011 reached 12.7% ($71.3 billion) compared to 10.6% ($57.5 billion) through year-end 2010. However, Fitch Ratings noted the 24% increase was ‘considerably lower’ than the 62% increase from the period of 2009 to 2010.
Furthermore, half of last year's new CMBS defaults were traced to the 2007 vintage. These were followed by the 2006 vintage (26.4%) and 2005 (11.7%), respectively.
‘Each of these vintages had fewer defaults in 2011 but contributed a consistent proportion of defaults compared with 2010,’ Fitch says.
For the first time in Fitch's default study, loans backed by office properties had the highest levels of new defaults, with 38.6% of the total ($5.3 billion) in 2011. Retail and multifamily followed, with 20.6% and 20.1% of the total, respectively. Fitch continues to have a negative outlook on office performance in 2012.
The full report is available online.
