Market-Peak CMBS Could See 30% Default via GlobeSt

The years between 2006 and 2008 were the peak period for CMBS issuance, and by several metrics these years also represented the trough of underwriting. Given the still-sluggish recovery in commercial real estate fundamentals, it stands to reason that clouds loom over securitized loans from the market’s peak, with the potential for inclement weather sooner (in the case of loans with five-year maturities) or later (for 10-year debt coming due in 2016 and 2017). Already the most troubled vintages, ’06-’08 CMBS loans could see a cumulative default rate as high as 30%, Fitch Ratings said in a report last week.

And while they didn’t put specific numbers on the extent of the trouble they foresee, both of the other major rating agencies have pointed to continuing strife in boom-period CMBS. Standard & Poor’s notes that of the ’07-vintage CMBS maturities, $19 billion are five-year term loans, approximately 85% of which are scheduled to mature in the first half of 2012.

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