First AJ Loss - CSFB 2005-C2

The winner is CSFB 2005-C2, with the first ever AJ-used-to-be-a-Triple-A loss as a result of a $124mm loss on the $135mm Tri-County Mall. The loan actually fetched $31.6mm in proceeds, but also had $6.9mm of advances and $9.9mm of ASERs to pay back resulting a 91.5% loss severity. The B, C, D, F, and G bonds were completely wiped out, and the AJ took a 5% loss.

This certainly won't be the last AJ to get hit with losses. Loans continue to get worked out with more vigor, and we've also seen an increase in high loss severity workouts in recent months.

Comings and Goings

This regular update has become quite irregular, but there has been somewhat of a lull in action now that "everything is better and prices can only go up" again...

-Aegon said it will start contributing loans to BAML deal.

-Barclays is updating the Lehman Agg with a CMBS 2.0 group of indices meant to reflect the post-crash CMBS issuance.

-Are things better or worse? It depends on who you ask:

1. Ratings Downgrades slowed at the end of 2010 (S&P) - they include RMBS in the report too.
   
2. Moody's downgrades Billions of CMBS. (However, the author of this one also describes the downgraded transactions as "structures where the bookrunner is passing through mortgage payments to investors")
   

-Trepp had some comments out last week regarding the risk surrounding front-pays now that they are mostly trading above par while at the same time loans are being worked out more quickly resulting in some unexpectedly fast pay-downs, and losses to investors. They highlight the CSFB 2005-C2 WAMU Irvine Campus loan (Maguire) that was recently modified with a 45% write down, wiping out classes up into the G class. That same deal also has a $142mm Tri-County Mall Loan that is expected to further wipe out classes up into the C class. They go on to highlight the Springfield Mall ($156.9mm), which is expected to get sold at just $42mm (to its current owner, Vornado. It appraised in January 2010 at $31mm). Springfield Mall was split equally between CMAT 1999-C1 and NASC 1998-D6.

-Freddie Mac is reportedly planning to double it's K series issuance to more than $10 billion in 2011. K10 is expected in the first quarter, expected average size to be $1.2billion, 50-80 mortgages, include a B class. (source: Real Estate Finance & Investment; no link)

Comings and Goings

CREConsole reports that Highland Mall in Austin (JPMCC 2002-CIB4) and Woodfield Corporate Center in Schaumburg, IL (NYLIM) are both going down. They're both interesting stories. Woodfield Corporate Center is owned by GE's Pension Fund and Lincoln Properties.

We previously commented on the fun lawsuits at Highland Mall between Dillard's and the owner - the departure of Dillard's will put the mall under officially and trigger co-tenancy clauses that will help bury it. CREConsole also noted that the mall was formerly a joint venture between Simon and GGGP - is that a harbinger of some sort?



Interest shortfalls continue to creep up. In fact, last month, the bonds that we own with interest shortfalls doubled. JPMCC 2008-C2 and CSFB 2005-C2 both experienced interest shortfalls at the AJ level. The LBUBS 2007-C1 AJ shortfall from the prior month apparently cured, albeit that might be temporary.

There are around 12k CMBS bonds out there, roughly, and currently 1,810 are experiencing interest shortfalls. That kind of puts in perspective.


Kilroy Realty (KRC), and yes I thought that was the name of the the thing Matt Damon put on his neck to attract Ellen Barkin in Ocean's 13 (that was a Gilroy though, it turns out), and no I have no idea who they are but I'll look into it, raised $250mm 10-year unsecured debt at +325 bps. That makes $7.35 billion across 18 transactions raised thus far in 2010!