Financial research and ratings firm Standard & Poor’s has been pushed out of commercial mortgage-backed securities deals following a $15 billion sale that went south last year, Bloomberg News reported.

Last July, a massive deal between Citigroup and Goldman Sachs fell apart after S&P pulled its ratings for the securities in the deal, saying it had to review its model used in rating the assets. Now, Wall Street is pushing back, finally busting the trio of ratings agencies that have had a stranglehold on the U.S. bond market, Bloomberg said. [more]

Despite the historically low interest rates, commercial owners worldwide may face significant hurdles refinancing in the coming year, the Wall Street Journal reported. And most of the five-year mortgages used for commercial properties when the boom was at its height will be coming due next year.

Of the $70 billion in commercial mortgage-backed securities outstanding that will mature next year, $15.5 billion of the fixed-rate mortgages and $12.2 billion of the adjustable-rate mortgages have been flagged by analytics firm Trepp as potentially difficult to refinance. [more]

More than 70 percent of 280 surveyed real estate CEOs, COOs and CFOs said they have a negative, or “bearish,” outlook for the commercial real estate sector over the next 12 months. The poll, cited by Reuters, was conducted by global law firm DLA Piper in connection with its Global Real Estate Summit held today in Chicago.

A lack of confidence in the Obama administration, the general gridlock in Washington and poor job growth were reasons behind the pessimism. Though sales have increased this year, and prices are up 12.5 percent from their lows in April, investors worry that the market will lose more footing.
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Much of the positive momentum in the nation’s commercial mortgage-backed securities market seemed to have vanished in July, Trepp says in a monthly report, with the nationwide delinquency rate spiking to 9.88 percent, an increase of 51 basis points from June.

For much of the spring, the CMBS market had been experiencing an upswing. There was a greater rate of loan issuance, troubled loan resolution and drop in delinquency rates. The sudden shift may be attributed to a technical change in the manner in which some servicers report their data, Trepp said, but widening CMBS spreads and an announcement by Standard & Poor’s that it was pulling a rating last week may have made issuers more tentative in their approach to new lending. – Katherine Clarke [more]

Crexus Investment Group said yesterday evening that it rejected an unsolicited $254 million acquisition offer by Starwood Property Trust. In the late afternoon yesterday, Starwood made the $14-a-share-offer to acquire Crexus, a Manhattan-based real estate investment trust. The Starwood offer was contingent on Crexus suspending its previously announced offer to buy $586 million in real estate assets from Barclays Capital Real Estate Finance. Crexus planned to launch an initial public offering of $50 million shares of common stock, which would be used to finance the acquisition of the Barclays assets. [more]

Commercial real estate investors may still feel some pain in 2011, according to a new report released today by Trepp. Nationwide, the rate of commercial mortgage-backed securities loans that are 30 or more days delinquent climbed to 9.2 percent in December, the highest ever recorded, according to Trepp. Manus Clancy, managing director of Trepp, said that the rocky nationwide delinquency rate was an indication of a rough road ahead in the commercial market.

“Many have speculated that… the commercial real estate crisis was nearing its final stages,” Clancy said. “The December delinquency rate underscored that there still may be some nasty surprises in store even as the market shows some signs of healing.” TRD

Commercial mortgage-backed securities loans are showing unusually high delinquency rates, according to the Mortgage Bankers Association, which noted that third-quarter delinquencies in that class of loans reached 8.58 percent — their highest level in more than 10 years. But other commercial and multi-family loans showed improvement in the third quarter, according to the MBA, with delinquency rates on loans held by Fannie Mae and Freddie Mac both below 1 percent. Overall, commercial delinquency rates are improving, according to Jamie Woodwell, vice president of commercial real estate research with the MBA. “Although weak, the economic recovery is just beginning to be seen in commercial real estate fundamentals,” Woodwell said. “Commercial mortgage performance among most investor groups… continues to be better than during the last major downturn of the early 1990s.” TRD

The delinquency rate among commercial mortgage-backed securities climbed gradually in September, according to Moody’s monthly CMBS report. Delinquencies climbed 14 basis points on the Moody’s index, hitting 8.24 percent, marking the smallest monthly increase since October 2008. The 311 loans that became newly delinquent last month had a combined value of $3.8 billion and brought the total number of delinquent loans to 3,971, representing $52 billion in debt. Nick Levidy, a managing director with Moody’s, said that while the rate of increase among CMBS delinquencies was modest last month, it’s far too soon to celebrate. “This easing of the rate of growth in the delinquency rate does not necessarily portend a near-term improvement in the market,” Levidy said. “The number and balance of loans becoming newly delinquent remain high.” TRD

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Investment management firm BlackRock was hired by state insurance regulators to evaluate the industry’s potential losses from holding commercial mortgage-backed securities, Bloomberg news reported. By the end of the year, BlackRock will review more than 7,000 securities, the National Association of Insurance Commissioners said yesterday in a statement. The New York-based firm will calculate loss expectations for the holdings, which will determine how much capital insurers must hold to cushion potential declines, NAIC said. Insurance regulators are searching for an alternative to Moody’s Investors Service and Standard & Poor’s, whose ratings were cited by some as one cause of the financial crisis. BlackRock advised financial companies and governments during the credit crisis on how to value mortgage-related assets. It won the NAIC contract from among 16 bidders. [Bloomberg]

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The commercial mortgage-backed securities market is showing some welcome improvement, according to data released today by commercial tracking firm Trepp. Almost 50 percent of loans in CMBS were paid off before their balloon date — the date at which the loan matures and the remainder of the balance is due. This is more than 10 percentage points higher than the rate seen in June, according to Trepp, and the highest level seen since 2008. Before the recession the payoff percentages hovered above 70 percent, according to the tracking firm. While this is certainly progress, however, Trepp cautioned against overly exuberant optimism. “This month’s number reinforces the notion that the recovery in commercial real estate lending is still in the embryonic stage,” a spokesperson for Trepp said. “In order to feel truly confident that lending for maturing CMBS loans in gaining traction, we would want to see this percentage exceed 50 percent for a period of three to four months.” TRD

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