s&p 15 months later the caution flag is out for cmbs 2.0

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Structured Finance Research Week:

15 Months Later… The Caution Flag Is Out For CMBS 2.0

Feature Story: 15 Months Later… The Caution Flag Is Out For CMBS 2.0

CMBS 2.0 Starts Slow In 2009, Evolves Quickly In 2010-2011

Recent Transactions Highlight A Departure From A Very Conservative Start

Overview Of 2010-2011 Multiborrower Transactions

Deal name Month/year Size (mil. $) No. of loans No. of bond classes (+IOs)

RBS 2010-MB1 Apr-10 309.7 6 5 (+2)

JPMCC 2010-C1 Jun-10 716.3 39 11 (+2)

GSMS 2010-C1 Aug-10 788.5 23 8 (+1)

JPMCC 2010-C2 Oct-10 1,101.3 30 11 (+2)

COMM 2010-C1 Oct-10 856.6 42 10 (+4)

WFCM 2010-C1 Oct-10 735.9 37 8 (+2)

GSMS 2010-C2 Dec-10 876.5 43 8 (+2)

DBUBS 2011-LC1 Feb-11 2,176.1 47 10 (+2)

MSC 2011-C1 Feb-11 1,548.4 37 12 (+2)

WFRBS 2011-C2 Feb-11 1,299.3 50 8 (+2)

2009 average 453.3 1 4 (+1)

2010 average 769.3 31 9 (+2)

2011 average 1,674.6 45 10 (+2)

Sources: Trepp LLC, Standard & Poor's. IOs--Interest-only classes.

Leverage And Debt Service Coverage Ratios In Recent Deals

Deal name Ratings'AAA'

C/E (%)'BBB-' C/E (%)

Issuer LTV (%)

Rating agency stressed LTV (%)

Issuer DSCR (x)

Rating agency stressed DSCR (x)

RatingsDirect

28-Feb-2011

by James M. Manzi, CFA, Brian Snow, CFA, and Kurt C. Pollem, CFA

It's been roughly 15 months since the CMBS sector was reborn following a protracted slumber during the financial

downturn. The so-called "CMBS 2.0" market began with the pricing of three single-borrower transactions with relatively

simple structures in late 2009, which paved the way for a series of relatively larger, more complex, multiborrower

transactions. Most recently, three $1.2 billion-plus conduit/fusion deals priced in February, each of which included an

average of 10 principal and interest bonds and two interest-only classes. Compared with late-2009 issuances, the newer

multiborrower deals have higher leverage, less debt service coverage, and somewhat looser underwriting.

The three transactions issued in late 2009 (DDR 2009-DDR1, BALL 2009-FDG, and JPMCC 2009-IWST) were each

collateralized by a single loan, but were backed by multiple properties. Each deal contained an average of four principal

and interest bearing bond classes and had an average issuance amount of approximately $450 million. Comparatively,

the seven multiborrower deals issued last year and the three we've seen this year are dramatically different in structure

and size.

The three transactions that came to market in late 2009 and the first multiborrower transactions of 2010 were

characterized by extremely low leverage and very strong debt service coverage ratios (DSCRs). In more recent deals,

however, those metrics have moved in a less conservative direction.

of 13[28-Feb-2011] Structured Finance Research Week: 15 Months Later… The Caution Flag Is Out For CM...

3/3/2011https://www.globalcreditportal.com/ratingsdirect/renderArticle.do?articleId=850860&SctArtId=61399&fro...

DDR 2009-DDR1*

S/M/F 19.13 - 51.7 64.3/65.2/62.4 2.49 1.48/1.52/1.44

BALL 2009-FDG*

S/F 23.91 - 51.5 73.1 / 62.9 2.13 1.40 / 1.42

JPMCC 2009-IWST*

S/R 22.20 - 58.9 73.4 / NA 1.55 1.32 / NA

RBS 2010-MB1

M/R 22.25 - 54.4 65.3 / NA 2.48 1.51 / NA

JPMCC 2010-C1

M/F 15.00 4.75 61.5 80.4 / 78.2 1.64 1.28 / 1.37

GSMS 2010-C1

M/D 18.50 6.00 53.7 70.8 / NA 1.88 1.45 / NA

JPMCC 2010-C2*

S/F 18.25 5.00 60.0 82.4 / 83.0 1.66 1.34 / 1.32

COMM 2010-C1

M/F 17.38 5.88 58.8 83.1 / 82.8 1.71 1.25 / 1.40

WFCM 2010-C1

M/F 17.75 5.88 58.3 80.6 / 80.0 1.82 1.31 / 1.34

GSMS 2010-C2

M/F 17.50 5.75 58.9 88.7 / 89.0 1.83 1.21 / 1.37

DBUBS 2011-LC1

M/F 19.50 6.13 62.3 94.0 / 91.8 1.48 1.07 / 1.18

MSC 2011-C1*

S/F 22.88 6.50 61.6 88.9 / 93.6 1.59 1.20 / 1.20

WFRBS 2011-C2

M/F 17.13 5.50 62.6 87.9 / 89.0 1.62 1.16 / 1.26

*Standard & Poor's rated. C/E—credit enhancement. Sources: Trepp LLC, presale reports from Standard & Poor's, Moody’s, and Fitch.

Compared with the first two single-borrower deals in late 2009, issuer LTVs are up about 10% (absolute basis) and

DSCRs are down quite a bit. Also, rating agency stressed LTVs have shifted upward: they began in the low 60s to low

70s, moved to the low 80s for the three deals issued in October 2010, and migrated to the high 80s and low 90s for the

first three deals of 2011. We see a similar trend in stressed DSCRs, which have trended down to about 1.2x from nearly

1.5x.



In fairness, LTV and DSCR levels in early CMBS 2.0 transactions were extremely conservative from a historical

standpoint. To find issuer LTVs below 55% and DSCRs around 2.0x we need to look at transactions that were issued at

the beginning of the CMBS market.

These trends toward higher leverage and lower DSCR are noteworthy, especially with respect to how quickly they

developed. Thus, it's worth examining some of the likely root causes of these "less conservative" trends and filtering out

what we believe is likely the good and the potentially bad news for the sector.

1. More competition We noted in our CMBS outlook (see Dec. 2, 2010, Structured Finance Research Week) that

there were far more active originators at year-end 2010 than at year-end 2009. We estimate that there are about 25 now

versus a handful then. If all else is equal, more competition for a finite pool of loans typically leads to less-conservative

deal statistics. The pool of loans is likely growing, however, which we believe is good news. Real Capital Analytics (RCA)

recently reported that commercial real estate transaction volume more than doubled in 2010 from 2009 and that sales

were especially strong in December and the rest of fourth quarter.

2. Some evidence of aggressive appraisals/valuations We have seen some examples where appraisals/valuations

look quite aggressive to us. In our view, investors should be on the look out for aggressive appraisals/valuations and look

for higher credit protection levels if they are present. There are a number of ways to gauge whether an appraisal appears

to be "reaching." Value per square foot is a good way to compare properties within (and even across) markets. It's also

good to evaluate whether a loan's total debt has come down as much as one would expect it to when it comes up for

refinancing, especially loans from the 2005-2007 period. Also, relatively low appraisal cap rates may indicate that the

appraiser is building in cash flow upside and that the lender is (ultimately) lending on it.

3. Cash flow underwriting appears steady For the most part, cash flows in recent deals are based on in-place trailing-

12-month stabilized property cash flows. This is considered to be more conservative than "pro forma" analysis, where

credit is given to potential future increases in property revenue (e.g., from higher rents). While we have seen some pro

forma loan underwriting in recent deals (e.g., in the Hollywood & Highland loan from the WFRBS 2011-C2 transaction),

the overall occurrences of this phenomenon are limited to a small number of loans. Thus, it doesn't appear that



'AAA' Credit Enhancement Levels Have Risen During The Past Few Years

U.S. Home Prices Drop For The Fifth Straight Month

(Editor's note: This is a summary of our forthcoming monthly report on December 2010 home prices.)

U.S. home prices declined for the fifth consecutive month in December on a seasonally unadjusted basis as

month-over-month home prices declined 0.9% and 1.0% for the S&P/Case-Shiller 10- and 20-City Composite

indices, respectively.

LoanPerformance's seasonally unadjusted price index decreased 1.8% in December when both distressed and

aggressive underwriting from a property revenue perspective has affected the higher LTVs or lower DSCRs significantly.

4. Cap rates appear to have come in a bit recently According to data from RCA, average national cap rates appear to

have come down a bit during 2010 after rising steadily during 2008 and 2009. Note that this data represents a national

average of all core property types; cap rates in certain regions and/or property types may have declined more or less (or

perhaps even increased) compared with the national average.

Since stressed cap rates are generally constant and market cap rates are dynamic, some variance between

issuer/appraisal LTVs and rating agency stressed LTVs can occur over time. This can partially explain a relatively larger

increase in rating agency stressed LTVs versus issuer LTVs when cap rates move downward.

Credit support at the top of the capital stack has also migrated upward over the past few years, which is a positive trend

for the market. In fact, average 'AAA' credit enhancement levels are 6%-9% higher than they were during 2005-2008,

bringing the average levels more in line with those from the 2001-2003 vintages.

We expect credit enhancement levels to remain range-bound at these higher levels for the time being.

For the full article, see "15 Months Later... The Caution Flag Is Out For CMBS 2.0," published Feb 23, 2011.

by Erkan Erturk

Key highlights of the December 2010 home price data include the following findings:



market sales are included. Excluding distressed sales, the index declined only 0.1%.

The FHFA home price index reached its seasonally unadjusted peak in June 2007. In December 2010, the

seasonally unadjusted FHFA home price index dropped 1.2%.

Home prices declined in 19 out of 20 metro areas except in Washington, D.C., and the decline was less than 1%

for nine regions on a seasonally unadjusted basis. According to the S&P/Case-Shiller index, home prices in

Tampa, Detroit, and Seattle decreased a little over 2% on a seasonally unadjusted basis in December.

On a year-over-year basis, the S&P/Case-Shiller 10-City index declined 1.2% in December and the 20-City index

decreased 12.4%; Phoenix, Tampa, Atlanta, Chicago, Detroit, Portland, and Seattle led the declines. This trend

still marks a significant improvement from early 2009, when year-over-year declines were 18% or more.

Our analysis of home-price tiers suggests that since mid-2006 low-price homes have more sharply declined in

price than mid- and higher-priced homes. When prices peaked between 2000 and 2006, low-price homes

experienced the brunt of the increases.

The values of the S&P/Case-Shiller 10- and 20-City composite indices are currently near their mid-2003 levels.

These indices peaked around mid-2006 and have since lost slightly above 30% of their values, which translates

to an aggregate decline of roughly $566 billion in the original appraisal values of homes across all regions.

U.S. home prices have declined on a monthly basis for the fifth consecutive month in December 2010. The

nonseasonally adjusted 20-City S&P/Case-Shiller home price index has dropped 4.3% since July. We also expect the

January S&P/Case-Shiller home price index—which is slated for release in late March—to depict declines. We continue

to stand by our belief that U.S. home prices aren't likely to improve during the seasonally slower winter months. In

addition, we continue to be concerned about the existing amount of shadow inventory—or the amount of distressed

properties that are not yet listed for sale. As a matter of fact, the housing futures suggest an additional 5.8% decline in

home prices through late 2011, which is in line with our overall expectation that home prices are likely to drop around 5%

through spring as sales slowly improve.

Recent home sales provided a mixed picture: Existing U.S. home sales rose and new home sales declined in January,

while the official housing inventory level dropped for existing homes and declined at a slower pace for new ones. We

attribute the increase in existing sales in January to buyers locking in lower rates as mortgage rates started to rise.



Nevertheless, mortgage rates are still low by historical standards. While low mortgage rates are likely to continue to

encourage refinancing to an extent, their influence on home buying activities has been limited due to the weak housing

market and a lack of demand. The latest pending home sales for December—reported on Jan. 27—rose 2%, following a

3.1% increase in November and a10.1% increase in October. As a result, we observed a modest increase in January's

existing home sales because pending home sales usually lead existing home sales by one or two months.

After the government's temporary tax credit for homebuyers expired at the end of April 2010, the mortgage purchase

applications experienced declines and sales dropped. While, U.S. home prices have stabilized considerably since the

recession officially ended in mid-2009, an elevated level of short sales and distressed asset sales, a large backlog of

distressed properties that have yet to be remarketed for sale, and a high national unemployment rate put the housing

market recovery at a disadvantage. In addition, we expect the ongoing policy and legal issues surrounding foreclosures

to continue to delay foreclosures to an extent, and as a result, the arrival of new distressed inventory to the market.

Average U.S. home prices declined for the past 12 months ended December 2010. In December 2010 alone, prices

broadly declined. The values of the 10- and 20-City seasonally unadjusted S&P/Case-Shiller Home Price Indices

declined 1.2% and 2.4% during this time period, respectively, and declined 0.9% and 1.0% in December alone. The value

of First American CoreLogic's LoanPerformance's seasonally unadjusted national home price index, which includes all

market and distressed sales, declined 1.8% in December. With distressed sales excluded, the value of the same index

declined only 0.1% in December. In general, distressed sales consist of short sales and the sale of real estate owned

(REO) properties—or properties that the lenders own.

We expect the next home price reports—which will come out in late March—to show drops in prices again. The National

Association of Realtors reported a 0.8% decline in the median sales price for existing homes on a seasonally unadjusted

basis from November to December, as well as an additional decline of 5.9% in January alone. In addition, the value of

the Federal Housing Finance Agency (FHFA) purchase-only home price index—another key home price indicator—

declined 1.2% on a seasonally unadjusted basis in December. Since the median sales price declined in January, we

expect the results across the FHFA, LoanPerformance, and S&P/Case-Shiller indices to depict at least modest price

declines next month.



GSE Reform Proposals May Help Revive Private Financing

Privatized system of housing finance with the government insurance role limited to government assistance for

We remain concerned with the volume of distressed residential mortgage properties in the U.S., as it suggests that the

slow recovery has yet to have a meaningful impact on the housing market. The growing volume of yet-to-be-liquidated

properties has created a large shadow inventory of distressed properties—or outstanding properties whose borrowers

are (or recently were) 90 days or more delinquent on their mortgage payments, properties currently or recently in

foreclosure, or properties that are REO. While the flow of distressed properties entering the market has been relatively

even to date, home prices could decline more if those properties come to market over the coming several quarters

because distressed sales usually involve significant price discounts. In terms of price impact, various reports indicate that

distressed properties are currently selling for an average of 25% to 30% less than nondistressed properties. However, we

believe the impact of the shadow inventory coming to market may be moderate. Overall, we estimate it will take 49

months, or more than four years, to clear the supply of distressed homes on the market in the U.S. (for additional

information, see "Fourth-Quarter Shadow Inventory Update: Drop In Liquidations, Stable Cure Rates Indicate

Increased Foreclosure Timelines," published Jan. 25, 2011).

Some home buyers might be waiting for home prices to decline even further. That is, the market's anticipation that home

prices will fall in 2011 will likely keep potential buyers on the sidelines until prices show signs of stabilization. The year-

over-year declines in mortgage applications to purchase homes suggest that weaknesses in the U.S. housing market

continue. The official months' supply of unsold new homes stood at 7.9 months in January, an increase from 7.0 months

in December. However, the new home inventory has been declining since mid-2006 due to lower constructions. The

supply of official existing homes declined to 7.6 months in January from 8.2 months in the previous month. In other

words, the official existing home inventory declined 5.1% to 3.4 million units in January. These trends suggest that the

shadow inventory is not yet making its way on to the market. The 9.0% unemployment rate in January, down slightly from

9.4% in December, is still well above historical average. We believe this trend could also continue to hurt consumer credit

and push bankruptcy rates up, potentially hampering home sales and prices.

The latest S&P/Case-Shiller home price indices (published on Feb. 22 and include data through December 2010), the

FHFA home price indices (published Feb. 24 for December), and First American CoreLogic's LoanPerformance home

price indices (published Feb. 8 for December) provide market participants with insights on the overall health of the

housing market and highlight trends that help forecast future price movements. We continue to watch the direction and

movement of home prices as key economic trends.

by Erkan Erturk

The private mortgage market has virtually disappeared since mid-2007, as Fannie Mae, Freddie Mac, FHA, and Ginnie

Mae provide more than 90% of new mortgage financing or guarantees. The GSE reform proposals indicate the U.S.

government's long-term intention to privatize housing finance. While the process could take many years, it still provides

hope for the revival of private-label housing finance activities and residential mortgage-backed securities (RMBS)

issuance in the future. However, we expect a lengthy timeline for this because the report does not specify a date for

winding down Fannie Mae and Freddie Mac toward achieving a fully-functioning private label mortgage market.

As a first step, we are likely to see the conforming loan limits for single-family mortgage loans in high-cost areas to drop

to $625,500 on Sept. 30, 2011. A series of legislative acts since 2008 have temporarily increased this limit to up to

$729,750 in certain high-cost areas in the U.S. The limit for one-unit properties in other areas is $417,000. However, we

still consider this amount very high. For example, the latest National Association of Realtors report shows that the median

sales price for existing homes is $159,000. Therefore, we take this expected drop in conforming levels as a hopeful sign,

but we note that it may not provide enough traction to restart the private-label mortgage market. Also, banks' current

funding positions may not necessarily provide economic incentives for private-label RMBS transactions even if private-

label housing finance activities pick up later this year.

The GSE proposals discuss three options for reducing the roles of Fannie Mae and Freddie Mac in the sector, but do not

recommend a specific course of action at this time.

The three options are as follows:



narrowly targeted groups of borrowers;

Privatized system of housing finance with assistance from government agencies for narrowly targeted groups of

borrowers and a guarantee mechanism to scale up during times of crisis; and

Privatized system of housing finance with assistance from government agencies for low- and moderate-income

borrowers and catastrophic reinsurance behind significant private capital.

EXCERPTS FROM RECENTLY PUBLISHED ARTICLES

European Auto ABS Issuance Revs

Collateral Performance Polarized Between North And South

By Sabine Dähn and Andrew South

Robust performance among most European auto asset-backed securities (ABS) has contributed to a return in investor

confidence, favorable issuer economics, and a consequent renaissance in new issuance. In the first four weeks of 2011,

auto ABS accounted for almost half of all European investor-placed securitization issuance according to our data, with

more transactions in the pipeline.

Although we expect continued stable collateral performance in auto ABS across northern European countries throughout

2011, where new issuance is most active, we believe that the uneven pace of economic recovery across the region could

polarize this performance along a north-south divide. Delinquencies in German transactions, for example, peaked in Q3

2009 at only about 0.51%, and have since dropped, given the economic recovery and falling unemployment rate.

Spanish and Portuguese transactions have performed less well, with significantly rising delinquencies reflecting the

continued pressure on consumers in those countries. In Spain particularly, collateral performance has deteriorated

sufficiently to cause some downgrades over the past year.

Our European auto ABS delinquency index illustrates that borrower performance has varied significantly by country, in

line with diverging economic growth and unemployment across Europe.

The acute rise in securitized Spanish auto loan arrears, for example, mirrors a sharp rise in the Spanish unemployment



Standard & Poor's Scenario Analyses Demonstrate Auto ABS Ratings' Likely Robustness To Moderate Collateral Deterioration

CMBS Delinquencies Increase Slightly In January

Summary Of Scenario Stress Results

By number of tranches (%) By initial issuance volume (%)

Estimated tranche downgrade (notches) Scenario 1 Scenario 2 Scenario 1 Scenario 2

0 72.7 36.4 76.2 30

1 22.7 15.9 18 21.5

2 4.5 15.9 5.8 24

3 0 18.2 0 23.4

4 0 0 0 0

5 0 9.1 0 0.6

6 0 4.5 0 0.4

Sample 44 tranches €15.8 bil. equivalent

rate and a similar deterioration in mortgage borrower performance. By contrast, the German unemployment rate recently

touched an 18-year low, while GDP has bounced back by more than 5% in real terms since its trough in Q1 2009.

Corresponding rating transition rates for auto ABS reflect these country differences.

Looking ahead, we anticipate slowing growth in the Eurozone and a continued divide in terms of economic strength, with

Germany leading the pack and Spain, Portugal, Italy, and Ireland trailing behind. This implies likely continued greater

rating pressure for auto ABS transactions originated in southern Europe. Comparatively greater credit enhancement

suggests that the rating impact of collateral deterioration alone could be limited. However, we note that sovereign and

bank counterparty rating pressures may be greater drivers of securitization rating migrations in some of these countries in

2011.

To quantify ratings' sensitivity to collateral assumptions in different transactions, we perform scenario stress testing for

new issuances alongside our rating analysis. These show that even under a hypothetical future fundamental stress

sufficient for us to raise our base case default assumptions by 30%, for example, most rated auto ABS securities would

not see their ratings lowered.

Analyses we have conducted for a sample of 44 tranches in 28 – predominantly German - transactions publicly rated

since May 2009 show that more than 70% of the tranches would likely see no rating movement at all under our first

scenario, and a further 23% would see rating downgrades of only one notch. In a more stressful—and more unlikely—

second scenario, 36% of tranches still would see no action, with a further 60% seeing actions of no more than three

notches.

Overall, we therefore expect that—even in a moderately stressed environment—ratings on these transactions would be

relatively stable.

Given the limited degree of collateral deterioration to date in most northern European countries where originators use

auto ABS for funding—and given that the outlook for these core European economies has stabilized—we currently view

even the prospective rating effects illustrated in our scenario analyses as a remote likelihood. We therefore believe that

other rating drivers—most notably the implementation of our updated counterparty criteria—may hold greater sway over

the trend in auto ABS ratings for 2011 in these countries. By contrast, southern European countries have seen collateral

deterioration sufficient to cause rating downgrades, and ongoing economic pressures could continue to be a factor here.

For the full article, see "European Auto ABS Issuance Revs Up On The Back Of Mostly Stable Loan Performance,"

published Feb. 24, 2011.

by Larry Kay and James Manzi, CFA

The CMBS delinquency rate started the year with a very modest increase. Continuing on a slow growth path that began

in the third quarter of 2010, the rate increased in January by nine bps to end the month at 8.98%. January saw $3.45



billion of new delinquencies, which was mostly offset by $3.31 billion of loans that were resolved either through liquidation

or by returning to current status. The margin between new and resolved delinquencies in January is one of the narrowest

that we've seen since early 2007.

The multifamily and industrial sectors both set delinquency rate records in January at 15.98% and 9.81%, respectively.

The 100-plus-bp increase in the industrial delinquency rate follows a 300-bp rise in December. Comparatively, the

lodging, retail, and office rates are slightly off their 2010 highs. From a geographic perspective, Texas alone contributed

approximately one-third of multifamily delinquencies (by loan count), the most of any state.

of 13[28-Feb-2011] Structured Finance Research Week: 15 Months Later… The Caution Flag Is Out For C...


European CRE Recovery Confined To Prime Markets

Delinquencies

Delinquency rate (%)

Lodging Retail Multifamily Office Industrial Other Total

Current month 14.36 7.1 15.98 6.42 9.81 6.12 8.98

Last month 14.09 7.15 15.68 6.5 8.78 6 8.89

Amount delinquent (mil. $)

Lodging Retail Multifamily Office Industrial Other Total

Current month 7,536 10,731 13,482 10,731 2,372 3,339 49,176

Last month 7,465 11,886 13,354 10,984 2,143 3,286 49,118

For the full article, see "Standard & Poor's North American CMBS Monthly Snapshot - January 2011," published

Feb. 22, 2011.

by Judith O Driscoll, Robert Leach, and Anne Horlait

Signs of recovery are being reported in the European commercial real estate market. In the U.K., for instance, asset

sales have picked up in the past 12 months since their trough in 2009. However, any recovery has been at the prime end

of the market, while European CMBS is predominantly secured by secondary assets. Standard & Poor's Ratings

Services thus believes that the loan maturity performance will remain under pressure in 2011.

The prime end of the U.K. market shows signs of strong recovery, in part because trophy assets with stable income that

promise income security are currently in demand from foreign and institutional investors, according to recent reports. But

the U.K. remains a two-tier market across all sectors. The secondary market remains weak, in our view, and constrained

by the lack of finance for anything but the best quality stock.

For Germany, which suffered less severe peak-to-trough declines than the U.K., we also anticipate there will be high

demand for core properties with low risk. However, the limited supply of such properties is likely to be a constraining

factor on investment activity. Trends seen over the past 12 months in the French property market show that investors

remain cautious and selective with a strong concentration of asset acquisitions in the greater Paris region.



Global Head of Structured Finance Research: Howard Esaki, New York (1) 212-438-7100; [email protected]

ABS, RMBS: Erkan Erturk, Ph.D., New York (1) 212-438-2450; [email protected]

CMBS, RMBS: James M Manzi, CFA, Charlottesville (1) 434-977-1450;[email protected]

CLO/CDO, CMBS, RMBS: Zachary Wolf, New York (1) 212-438-1127; [email protected]

Europe: Andrew South, London (44) 20-7176-3712; [email protected]

Mark Boyce, London 44(207)176-8397; [email protected]

Arnaud Checconi, London (44) 20-7176-3410; [email protected]

Sabine Daehn, Frankfurt (49) 69-33-999-303; [email protected]

Investor Relations Contacts: Ted Burbage, New York (1) 212-438-2684; [email protected]

Simon Collingridge, London (44) 20-7176-3841; [email protected]

Against this background, European CMBS loan performance in January continued the trend we reported in our last

bulletin: More loans failed to meet maturity obligations and either fell into default or extended. We continue to receive

reports in February on the loan and note performance following January's interest payment date (IPD) and we will report

in full on those in our next bulletin. So far, the information we have received in February reinforces our January analysis.

For the full article, see "European CMBS Monthly Bulletin (February 2011): Signs Of Recovery Confined To The

Prime End Of The Market," published Feb. 22, 2011.

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s&p 15 months later the caution flag is out for cmbs 2.0

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