Cumulative CMBS Defaults Up But Slowed by New Issuances

The cumulative default rate for commercial mortgage-backed securities (CMBS) in the U.S. rose over the third quarter, largely due to an increase in defaults among office loans, according to the latest data from ""Fitch Ratings"":http://www.fitchratings.com/web/en/dynamic/fitch-home.jsp.

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The rate rose from 13.2 percent in the second quarter of this year to 13.5 percent in the third quarter, according to Fitch.

The total amount in CMBS loans that defaulted in the third quarter was $2.2 billion. The total number of newly defaulted loans during the quarter is 119.

Office loans made up more than half of both newly defaulted loans in the third quarter and year-to-date defaults, according to the ratings agency.

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Of the $2.2 billion newly defaulted CMBS loans in the third quarter, $1.4 billion were office loans.

Despite the slight increase in defaults, Fitch says new issuances of CMBS loans are staving off the CMBS default rate somewhat.

""The increase in new CMBS issuance over the last two quarters has helped to stem rising default rates,"" stated Britt Johnson, senior director of Fitch Ratings.

New issuances have risen almost three-fold over the year, according to Fitch. In the third quarter, new issuances totaled $6.2 billion. In the first quarter, they totaled $2.1 billion.

However, Fitch found in addition to the 119 newly defaulted loans in the third quarter, 81 CMBS loans reached maturity and did not refinance. These loans totaled $1.7 billion.

Eleven of the 81 are now paid in full â€" accounting for $723 million of the $1.7 billion.

Those that are not paid in full and have not been refinanced include 37 five-year loans from the 2007 vintage, totaling $1.1 billion, and 24 ten-year loans from the 2002 vintage, totaling $132.7 million.

During the third quarter, three loans with values greater than $100 million defaulted, including One Skyline Tower, a $678 million office space in Virginia; Colony IV Portfolio B, a $171 million loan on office/industrial spaces in six states; and Kroger Center, a $116 million office space in Florida.