KBRA Releases Research – CMBS 2.0 Weathers Its First Storm

NEW YORK–(BUSINESS WIRE)–KBRA releases research on commercial real estate (CRE) securitization credit performance among conduit, single borrower/large loan (SB/LL), and CRE collateralized loan obligation (CLO) transactions during the pandemic. COVID’s onset in March 2020 marked the start of the first major credit dislocation since the global financial crisis (GFC). Despite major challenges stemming from this disruption, CRE transaction performance has held up reasonably well, with lessons learned from the GFC helping to mitigate COVID’s credit impact.

In the report, we compare CMBS delinquencies both pre- and post-GFC, as well as conduit credit enhancement levels, loan-to-value, and interest-only loans at the AAA and BBB- rating categories. We also review KBRA’s CRE ratings, which performed relatively well despite the challenges that lodging and retail presented during the pandemic. From March 2020 through February 2022, KBRA’s CRE ratings exhibited an investment grade ratings stability ratio of 94.2%, and at the AAA category it was 99.2%. This is in stark contrast to legacy downgrades that resulted from the GFC.

While we will not speculate on where the next crisis will come from, it is fair to say that clouds are gathering on the horizon. Should recessionary forces arise, this will inevitably contribute to rating volatility; however, CMBS 2.0 deals are better positioned than 1.0 to weather future storms.

Click here to view the report.

Related Publications

• CMBS Loan Performance Trends: February 2022
• CMBS Trend Watch: February 2022
• KBRA’s Global Rating Transition Study: 2011-2021

Default and Loss Studies

• Conduit CMBS Default and Loss Study: Default Volatility, Loss Stability
• Freddie Mac K-Series: Loan Default and Loss Study
• CRE CLO Loan Default and Loss Study
• CMBS Single-Borrower Default and Loss Study Update

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

Contacts

Roy Chun, Senior Managing Director

+1 (646) 731-2376

roy.chun@kbra.com

Larry Kay, Senior Director

+1 (646) 731-2452

larry.kay@kbra.com

Giselle Vuong, Associate

+1 (646) 731-2435

giselle.vuong@kbra.com

Nitin Bhasin, CFA, Senior Managing Director

+1 (646) 731-2334

nitin.bhasin@kbra.com

Business Development Contact

Michele Patterson, Managing Director

+1 (646) 731-2397

michele.patterson@kbra.com