Fitch: Specially Serviced U.S. CMBS Loan Valuations Down Slightly

NEW YORK--(BUSINESS WIRE)-- Appraised values with reported year-over-year-appraisals fell slightly for specially serviced U.S. CMBS, with retail leading property valuation declines, according to Fitch Ratings in its latest U.S. CMBS weekly newsletter.

Appraised values for the 495 loans in the Fitch-rated universe fell 0.5% compared with an increase of 1.5% for the prior period. Retail valuations accounted for 10 of the 15 largest declines in Fitch's study. Approximately 51.5% or 255 of the 495 loans in the study experienced a decrease in appraised value from the previous appraisal. Fitch has again observed numerous examples of large reductions in appraised value over the past 12 months, with 19 assets experiencing a decline greater than 40%. Retail again saw a 3.6% decline. Of note, retail loans with a securitized loan balance greater than $40 million (16 loans), experienced an average decline of 13.3%,

Appraised values on seasoned assets still in special servicing have continued to fall in value despite generally rising commercial real estate market valuations as they tend to become obsolete or otherwise non-competitive. Fitch remains concerned with properties in non-core markets and expects that loans not resolved in the near term will continue to experience declining values. Additionally, master servicers may be less willing to advance for assets where special servicers are planning 'value-add' strategies, as these older vintage transactions are shrinking in size and there is little excess cash to recover any outstanding advances.

Assets held for more than four years in special servicing saw an increase in value (0.9%, 161 loans). Fitch cautions, however, that servicer advances and expenses may outweigh increases in value. Fitch has observed a lengthening of REO aging for assets in special servicing. As reported in Fitch's loss studies, longer hold times often result in higher losses for assets. Most observations in the study are from the peak vintages of 2005-2008, with 427 of the 495 observations and experiencing an average positive change of 0.2%. Only 12 assets from CMBS 2.0 vintage transactions were in the study, with those assets experiencing a high average decline at 5.5%.

Additional information is available in Fitch's weekly e-newsletter, 'U.S. CMBS Market Trends', which also contains recent rating actions and an overview of newly released CMBS research, including Fitch presales and Focus reports. The link below enables market participants to sign up to receive future issues of the E-newsletter:

'http://pages.fitchemail.fitchratings.com/CMBSMktOptin/'

Additional information is available at www.fitchratings.com.

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View source version on businesswire.com: http://www.businesswire.com/news/home/20160509005897/en/

Fitch Ratings
Karen Trebach
Senior Director
+1-212-908-0215
Fitch Ratings, Inc., 33 Whitehall Street, New York, NY 10004
or
Mary MacNeill
Managing Director
+1-212-908-0785
or
Media Relations:
Sandro Scenga, +1-212-908-0278
[email protected]

Source: Fitch Ratings

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