Tuesday, August 11, 2009

Fitch Downgrades 15 Classes of Commercial Mortgage Securities

Fitch Ratings has stepped up to the plate and downgraded 15 toxic classes of commercial mortgage securities; all were held by a Credit Suisse Commercial Mortgage Trust. For it's part, Fitch deserves credit for coming to the table with a set of realistic assumptions concerning the subject property's cash-flows and market value. The ratings firm is assuming a 15% decline in cash-flows from the end of 2007, and a 35% decline in market values across the board from the date of these securities issuance. From my standpoint, this is about as accurate a set of assumptions as one could realistically come up with at this time, given of course the substantial level of uncertainty in the economy. Additionally, Fitch cited the following two properties for their exceedingly weak fundamentals:
  • 1100 Executive Tower, a 372,814 sqft office complex which boasts the grim location of Orange,CA.
  • Radisson Hotel Dallas North, a hotel secured by 294 rooms whose revenue/available room has slipped over 25%, translating into an even uglier 44.3% decline in the hotel's net operating income.
The question now becomes whether banks can earn their way out of the both the residential and commercial toxic debt holes - at the same time. Who knows though, as anything is possible with a little help from the FASB.

*full report available to subscribers; you'll have to take my word on this one Sphere: Related Content

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