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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: MulhollandDrive who wrote (165101)	11/18/2008 5:08:45 PM
From: MulhollandDrive	Read Replies (1) \| Respond to of 306849

so are we immune to this kind of news yet? reuters.com. UPDATE 2-Big CMBS loans seen near default, index yields soar Tue Nov 18, 2008 4:08pm EST (Recasts lead, adds analyst comment) By Al Yoon NEW YORK, Nov 18 (Reuters) - Two of the largest loans in recent commercial mortgage bonds, including one for two Westin hotels, appear near default, underscoring the stress that has upended the $700 billion market and sending yields soaring. A $209 million loan for Westin hotels in Tucson, Arizona, and Hilton Head, South Carolina, in October was transferred to a special servicer in October "due to imminent default," Credit Suisse analysts said in a research note on Tuesday. The loan, originated by JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) in December 2007, is split between two JPMorgan-issued commercial mortgage-backed securities (CMBS), representing 8.9 percent of each deal, Credit Suisse said. A JPMorgan spokesman declined to comment. Westin is owned by Starwood Hotels & Resorts Worldwide Inc (HOT.N: Quote, Profile, Research, Stock Buzz), which last month reported lower third-quarter profit and cut its full-year forecast as the weakened U.S. economy hurt demand for travel and lodging. The Tucson hotel features a 27-hole Jack Nicklaus golf course. Commercial real estate securities have been shattered this year amid expectations weak underwriting standards of recent years and slowing economic growth will increase defaults from historically low rates. Many loans were made on expectations that cash flows from office rents, retail stores and hotels would continue to rise. Tight credit conditions have also eliminated refinancing opportunities. "In this market, if loans are transferred for imminent default, I would expect more of those will default," said Mary MacNeill, an analyst at Fitch Ratings in New York. "Lack of liquidity and overall declining values" of the properties make that more likely, she said. A $125.2 million commercial mortgage for the Promenade Shops at Dos Lagos -- a retail center located in California's home foreclosure-ridden Riverside-San Bernardino-Ontario metropolitan area -- this month was also transferred to a special servicer, which focuses on troubled loans, according to Credit Suisse. The Promenade loan is 10.8 percent of one of the JPMorgan CMBS containing part of the Westin loan. Traders ramped up bearish bets on Tuesday, pushing yield spread premiums to record levels on CMBX-5 indexes, a series of derivatives containing the most recent CMBS issues. The spread on the top, "AAA" rated CMBX-5 rose about 120 basis points on Tuesday to a record 540 basis points, more than five times the level in May, according to a dealer. Delinquencies on loans in CMBS could rise about a quarter percentage point to 0.75 percent in the fourth quarter from the third quarter as the credit crunch saps liquidity, or the money available for lending, Fitch said on Monday. That compares with rates above 20 percent for the riskiest residential mortgages. The percentage of commercial real estate loans sent to special servicers has jumped to nearly 1 percent of deals by mid-2008 from less than 0.5 percent a year earlier, according to JPMorgan data. The data suggest more defaults, and possibly interest shortfalls for investors as fees to special servicers mount, JPMorgan said in a slide presentation this week. Servicers can keep loans out of default by extending loans or through other borrower negotiations, but that depends on whether they see value in the property, Fitch's MacNeill said. (Editing by James Dalgleish) © Thomson Reuters 2008. All rights reserved. Users may download and print extracts of content from this website for their own personal and non-commercial use only. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world. Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests. ----------