A Fitch Ratings report shows US CMBS 2.0 going strong, beating out CMBS 1.0 deals in Fitch’s rated universe $206.1B to $146.6B.
CMBS 2.0 is looking pretty safe, with only $310M—or 37 loans—defaulted and only $486M, or 40 loans, in special servicing—compared to 997 loans worth $18.9B in CMBS 1.0.
Harvard economist Ray Torto says this is to be expected. "CMBS 2.0 distinguishes itself from 1.0 by better underwriting standards,” Ray says. “Lower LTVs, less interest only, etc. It is no wonder that it performs strongly.”
Investors hope this strength continues as a perfect storm is brewing: Borrowers looking to refinance at the end of their loan cycle will have higher Fed rates to deal with, putting CMBS 2.0 at risk for maturity defaults.
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