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25 October 2012

Fixed Income Research

http://www.credit-suisse.com/researchandanalytics

CMBS and CMBX spreads and prices

CMBS swap spread

1-wk chg

Trailing 12-month

10/23/12 Min Max Avg

AAA 5yr 200 0 200 310 271

AAA 10yr 92 -3 92 335 200

GG10 A4 153 -4 153 350 243

AM 245 -5 245 755 431

AJ 775 -10 775 1750 1249

CMBS price

AA 10yr 50 1 40 50 45

A 10yr 28 0 25 29 27

BBB 10yr 15 0 15 16 15

BBB- 10yr 11 0 10 11 10

New issue CMBS

AAA 5yr (30% CE) 45 0 45 170 98

AAA 10yr (30% CE) 85 0 85 170 122

AAA Junior 135 -15 135 335 215

AA 175 -15 175 500 287

A 250 -5 250 605 398

BBB- 455 -20 455 805 653

CMBX.3

AAA 93.9 -0.5 86.4 95.5 92.1

AM 86.2 -0.8 72.7 87.4 82.0

AJ 66.2 -1.2 54.3 72.0 63.5

BBB 9.0 -0.1 9.0 12.5 10.2

BBB- 7.4 -0.2 7.4 10.2 8.5

Source: Credit Suisse, Markit

Research Analysts

Roger Lehman

+1 212 325 2123

[email protected]

Serif Ustun, CFA

+1 212 538 4582

[email protected]

Sylvain Jousseaume

+1 212 325 1356

[email protected]

Tee Chew

+1 212 325 8703

[email protected]

CMBS Market Watch Weekly

Securitized Products Americas

Market activity and relative value

Even with stocks down over 3% on the week, CMBS spreads held firm and

some sectors even managed a marginal tightening.

We believe that there are several factors at work driving the outperformance,

including stabilizing fundamentals and improving demand for higher-yielding,

well-enhanced bonds.

We also believe that our “stronger hands” theory of bonds moving into portfolios

of longer-term investors has reduced spread volatility versus a year ago.

Activity earlier this week was curtailed by the ABS conference in Miami.

Our view on relative value remains unchanged and we like AMs, wider super-

seniors, and select AJs in legacy space.

CMBS loans in the news

We provide updates on the sale of 575 Lexington and the auction of DRA-

CRT properties.

We also discuss the partial sale of 2 Rector Street, the lease renewal at U.S.

Bancorp, the new loan on Fashion Outlet Las Vegas, and the first paydown of

CMBX.5 AAAs.

October’s credit stats show further deceleration

In keeping with the recent trend, as well as our expectations, October’s

remittance reports showed further deceleration in the rate of credit

deterioration.

We believe the biggest reason for the sudden change in the rate of new credit

problems is the reduction in conduit loans reaching maturity.

Another big reason for improvement, at least in some of the headline

statistics, is the resolution of many problem loans through liquidations,

payoffs, and modifications.

The 60+-day delinquency rate across our legacy conduit universe fell 6 bp in

October, the third consecutive monthly decline. The Credit Suisse Conduit

Loan Impairment Rate (CLIR) rose only 6 bp in the past month to 12.8%, the

second smallest rise in over a year.

Liquidations fell, but due to some of the largest loans incurring sizable losses,

the overall loss severity on the month rose.

25 October 2012

CMBS Market Watch Weekly 2

Market activity and relative value

Even with stocks down 3.4% over the past week, CMBS spreads were firm, or even

marginally tighter, as the sector continues to outperform.

On the legacy CMBS side, we see the top of the capital stack as nearly unchanged at the

super-senior level, over the past week, while AMs and AJs are trading between

unchanged and a few basis points tighter. A similar story on the new issue side emerges,

where the triple-As did not move, but the credit quality curve continued its flattening bias.

New issue double-As to triple-Bs are between 5 and 15 bp tighter.

The sell-off in stocks over the past few days also drove corporate spreads slightly wider

and CMBS outperformed these benchmarks as well, but by a smaller margin than it did

versus the equity market. The corporate IG index is about 7 bp wider week-over-week

while the high yield market is down nearly 2 points.

Activity has been very light early this week, but we do not believe that is the reason for the

outperformance. Monday and Tuesday’s trading was curtailed by the ABS conference in

Miami. The conference was well attended and we would describe the mood there as

reasonably bullish (with the requisite caution about a negative macro event that has

permeated all of these types of gatherings over the past year or so).

We believe that the outperformance of CMBS, especially versus equities, can be attributed

to several factors, many of which have been in place all year.

Some of the recent pressure on equities, and by extension corporate bond spreads, has

been related to recent quarterly earnings announcements. While CMBS would be

susceptible to any drag in the economy from this, the relationship is less direct than it

would be on stocks and corporate bonds.

Additionally, as we have argued recently, fundamentals across the various property

sectors have generally been recovering, although at a very slow pace. We discussed the

Q3 CRE fundamentals in more detail in a recent report dated October 11, 2012. We also

noted that property prices have been relatively flat over the past few months but are not

weakening.

Furthermore, as we discuss in greater depth in a section below, October’s remittance

reports indicate that although CMBS credit has not started to improve, the pace of

deterioration has slowed according to the many metrics we looked at. This is good news,

especially as a wave of maturing loans pushed some of these measures, such as the

delinquency rate, to new highs earlier this year.

Despite the level of maturing loans, many of which were highly leveraged, the payoff rate

exceeded the market’s expectations. Using our methodology, 68% of loans scheduled to

payoff in the first ten months of this year have already done so successfully, including

more than half of the five-year maturing loans (see Exhibit 1).

https://doc.research-and-analytics.csfb.com/docView?language=ENG&format=PDF&document_id=1001255301&source_id=emrna&serialid=Ecd2WI8568AUa1HF2MjnXY%2bF16Aphsr508daYOh%2f24M%3d

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25 October 2012


Exhibit 1: Payoff rates for 2012’s maturing loans have exceeded expectations (percentage of loans due from January to October 2012)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

5-Yr Term 7-Yr Term 10+-Term Total

Paid Post Maturity

Paid At Maturity

Prepaid

Source: Credit Suisse, Trepp

The availability of financing is also improving, which is not only a reflection of the

improving fundamentals, but should provide a positive feedback loop and further help

credit improve, as it will allow more loans to ultimately payoff, on time, with no loss.

While fundamentals are neutral to mildly positive, there is also good news on the technical

front from both the supply and demand side.

While new issue supply is likely to top $40 billion this year, in line with our target, net

supply is still dwindling. As we discuss in the credit section, the outstanding balance of

CMBS conduit deals has fallen $39 billion in 2012.

At the same time we believe that demand for CMBS, especially at the top of the capital

stack, has increased. The introduction of the latest round of quantitative easing should

only increase investors’ appetite. Even though the program specifically targets Agency

MBS, we have argued that other securitized products with higher yields, such as CMBS,

will also benefit. We also believe that the extended low-rate language from the Fed helps

bolster the demand for such credit assets with wider spreads.

This should further increase the already improving demand for well-enhanced and well-

structured CMBS at the top of the credit stack from both new and seasoned investors.

We believe that in addition to the increase in demand there has been a shift in the sector’s

investor base towards participants that are longer-term oriented. This “stronger-hands”

theory would also, in part, explain why spreads are less volatile and less susceptible to a

shift in the macro-environment today than they were just a year ago. A year ago a larger

share of the risk was owned by the Street and shorter-term investors.

Given the move over the course of the year, there is the potential for year-end profit taking,

but if there is no change in the macro environment, this should be limited. Many investors

are concerned that if they sell bonds today they will not be able to replace them. We

believe this demand will also help to limit any spread widening as investors seemed

poised to buy CMBS on dips.

Of course, there are real risks and uncertainties that lie ahead. These include the

upcoming election, the approaching fiscal, cliff and the ever-present possibility of a euro-

led crisis just to name a few. CMBS does not trade in a complete vacuum and if the macro

markets continue to feel pressure, CMBS spreads will eventually succumb and widen.

25 October 2012


However, we still believe, in the base case, CMBS should continue to do relatively well.

We also believe – as we have espoused throughout the year – that any further tightening

may not occur linearly and there are likely to be bouts of widening or pauses in the trend.

Given this backdrop, we see no reason to change our outlook for the sector or our relative

value views at this juncture.

Within the legacy sector, we continue to favor AMs, especially the wider-trading names.

The wider-trading super-seniors should also outperform as the quality differential collapses,

and spreads narrow toward the tighter trading names that have far less room to move, in

our view.

We still believe select legacy AJs make sense, but these need to be picked on a deal-by-

deal basis. We believe from a credit convexity standpoint the mid-priced bonds make the

most sense in AJs. Similarly, although more credit work is needed, we believe there are

likely opportunities below AJs in the better quality deals. As AJs and AMs have put in a

strong rally this year, the double-As have barely moved.

Turning to new issue bonds, we have noted that the super-seniors have some, but limited

upside and continue to believe that the credit quality curve is poised to flatten. Last week,

however, we switched to a more neutral outlook for triple-Bs after this part of the credit

curve enjoyed a strong tightening move since June. We are not so much worried about a

lack of sponsorship (as the supply is still relatively small) but believe, as we discussed, the

bulk of the spread tightening on these bonds has likely already occurred.

CMBS loans in the news

575 Lexington financing secured; loan payoff soon

BACM 2007-1, BACM 2007-2

Commercial Real Estate Direct reports that financing for the purchase of 575 Lexington

Avenue property had been secured, paving the way for the deal to close and the existing

securitized loan to pay off soon as we expected.

A $275 million financing was provided by a consortium of CIBC, Bank of America, Royal

Bank of Canada, and Blackstone to facilitate the $360 million purchase of the New York

City midtown office building. The senior debt is reportedly provided by CIBC and Bank of

America, while the Royal Bank of Canada and Blackstone provided the mezzanine debt.

The property currently secured a $257.1 million loan, split evenly into two pari-passu notes

and securitized in BACM 2007-1 (5.0% of deal) and BACM 2007-2 (6.0% of deal). The

loan had been performing since its modification in October 2011. The modified loan terms

include a $75 million principal paydown, a change in the payment structure reducing the

payment rate to 5% for 24 months, a maturity extension of three years to October 2016,

and the right to freely prepay the loan with 30-days advanced notice.

Should the loan pay off in full, including all accrued interest which adds up to $1.9 million

as of October, the front-pay bonds from each deal would be paid down significantly and a

large amount of interest shortfall would be recovered.

For BACM 2007-1, the A3 tranche would pay down by 32% of the current balance (or 29%

of original balance), while Classes C (originally rated AA) to F (originally rated A-) would

recover all interest shortfalls (assuming no other loans have changes in shortfalls). Class

G (originally rated BBB+) would recover part of its interest shortfall.

For BACM 2007-2, the A2 tranche would pay down by 49% of the current balance (or 17%

of original balance), while Classes G (originally rated A-) and H (originally rated BBB+)

would recover all interest shortfalls (assuming no other loans have changes in shortfalls).

Class J (originally rated BBB) would recover part of its interest shortfall.

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25 October 2012


Stake in 2 Rector Street trades

CWCI 2007-C3

Various news sources reported that Savanna, a real estate private equity firm, has

acquired a controlling interest in 2 Rector Street. Stellar Management will retain a minority

stake. No valuation was provided, but the investment is a positive sign for the securitized

loan that has been in special servicing twice and previously modified.

The property backs a $110 senior loan, of which $100 million is securitized in CWCI 2007-

C3 and makes up 5.4% of the deal, as of October’s remittance reports.

Savanna had owned part of the property since 2007, when it first bought a portion of the

first mortgage at a discount. In August 2010, when the loan was modified, Savanna

increased its stake and provided part of a $10 million mezzanine loan that helped to

recapitalize the property. The modification at that time was considered as non-material, by

our classification, as it did not change any financial terms that would affect the maturity

date or cash flow payments of the securitized note. An appraisal in May 2010 indicated the

value of the building at just $51 million.

The loan was moved to special servicer again in August 2012, due to the servicer’s

determination of imminent default. However, the loan is currently performing. It appears

from the servicer’s comments that there was a second modification, also non-material, as

the financial terms are not changed. The loan matures in May 2017 and is freely

prepayable only four months prior to maturity.

The most recent financials reported are for year-end 2011. The occupancy rate was 81%.

The largest tenant, NYDOT, which leased 17% of the space before exercising its

termination option, vacated in July 2009.

According to the news articles, there are plans made for an extensive capital improvement

program to modernize the building, costing millions.

DRA-CRT auction update

JPMCC 2005-CB13

A few weeks ago we noted that many of the properties that backed the DRA-CRT loan

were being put up for sale, via a bidding process, on the Auction.com platform. As a

reminder, this is the largest exposure in the JPMCC 2005-CB13 deal, with an outstanding

balance of $180.9 million (which represents 8.6% of the transaction). The 16 properties

that originally backed the loan are now REO. Of these, we counted 14 properties that were

originally set to be auctioned off.

For the purposes of the auction, the properties were divided into three sub-portfolios

based on location (Jacksonville, Orlando, and Charlotte). We could not find the two

remaining properties, located in Rockville, Maryland, listed.

The Orlando and Jacksonville sub-sets were postponed and only the Charlotte portion

wound up being put up for bid. The highest bid on the Charlotte portion that we noted was

$15.4 million. There are two Charlotte-based properties that have a combined allocated

balance of $19.6 million. The appraisal on these assets, dated November 2011, totaled

$17.3 million.

As we have discussed in the past, such as with the One WestChase Center loan, the end

of the auction does not necessarily mean that the property has been sold. There is often

an unknown reserve price that needs to be met. From our understanding of the auction

lingo used, we do not believe the Charlotte bid met the reserve price.

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25 October 2012


The auction on the Orlando and Jacksonville properties was postponed to this week and

the bidding concluded on Wednesday afternoon.

The Jacksonville portion consists of seven properties and received a high bid of

$26.5 million, according to our notes. We believe it likely that the properties will be sold at

that price. The allocated balance of these properties was $84.8 million and the November

2011 appraisal pegged the value at $32 million.

The Orlando portion consists of five properties and received a high bid of $33 million

compared to an allocated balance of $51.1 million and a November 2011 appraisal of

$36.6 million. There was no indication on the website that this met the reserve price.

As a result, we would expect to see a partial paydown on the DRA-CRT loan in the coming

months on this loan.

Largest tenant renews lease at U.S. Bancorp

WBCMT 2005-C19

U.S. Bancorp renewed its lease at the aptly named U.S Bancorp Center, its US

headquarters, for another 10 years. The 930K square foot property, located in Minneapolis,

MN, backed a $105 million loan in WBCMT 2005-C19 (making up 12.0% of the deal).

As the largest tenant, U.S. Bancorp, occupies 635K square feet, or 68% of the building.

The renewal of the lease, which is set to expire in May 2014, is a positive for the loan,

which matures in May 2015. The loan, which pays only interest, had been performing

since securitization. The DSCR (on a net cash flow basis) had consistently been above

2.3x. With the lease renewal, we do not expect any change in the loan performance.

Fashion Outlet of Las Vegas refinanced

COMM 2007-C9

According to the SEC filing for the upcoming COMM 2012-CR4 deal, the loan on Fashion

Outlet of Las Vegas was refinanced. The retail property currently backs a non-performing

matured loan in COMM 2007-C9 with a $103 million outstanding balance (3.9% of the deal).

The new financing includes a $75 million five-year maturity loan, which would be securitized

in the upcoming deal, and a $32 million mezzanine loan. The 376k square foot outlet center

is located in Primm, Nevada, which is approximately 40 miles south of Las Vegas.

CMBX AAA 5 started to pay down in October

CMBX AAA.5 experienced its first notional reduction in October after the CD 2007-CD5 A4

class paid down by approximately $740K. This is the second triple-A contract to

experience a component class paydown after AAA.1 started to amortize in July.

We thought it interesting that the series 5 paydown predates that of earlier series tranches.

Given the evolution, one could have reasonably expected the AAA.2 or AAA.3 to be the

next contracts to pay down.

In reality, the speed of pay down is the result of a complex interaction between the deal

concentration in 5-year and 7-year non-multifamily balloons (buffers before the LCF class),

the concentration in multifamily loans (directed to the A1A class), as well as to the volume

of liquidations to date.

We list in Exhibit 2 the percentage of each CMBX deal that needs to pay down before the

triple-A tranche from that series would start to amoritize. For this purpose, we adjusted the

percentages to take into account the fact that multifamily directed loan proceeds will, in

general, be applied to A1A classes rather than to the last cash flow class.

25 October 2012


Exhibit 2: Adjusted percentage of the deals in front of each CMBX component

AAA.1 AAA.2 AAA.3 AAA.4 AAA.5

Class Adj % Class Adj % Class Adj % Class Adj % Class Adj %

BACM 2005-5 7.4 BACM 2006-3 2.7 BACM 2007-1 22.1 BACM 2007-2 25.6 BACM 2007-4 19.9

BACM 2005-6 5.7 BACM 2006-2 10.9 BACM 2006-6 36.7 BACM 2007-3 11.8 BACM 2007-5 25.2

BACM 2005-4 17.6 BACM 2006-4 13.0 BSCMS 2006-PW14 12.1 BSCMS 2007-PW17 17.3 BSCMS 2007-PW17 17.3

BSCMS 2005-PWR9 12.6 BACM 2006-5 22.3 BSCMS 2007-PW15 6.4 BSCMS 2007-PW16 22.7 BSCMS 2007-T28 10.2

BSCMS 2005-T20 11.8 BSCMS 2006-PW12 10.9 CD 2007-CD4 18.7 CGCMT 2007-C6 19.9 BSCMS 2007-PW18 28.6

BSCMS 2005-PW10 7.9 BSCMS 2006-PW13 11.5 CGCMT 2006-C5 9.6 CWCI 2007-C3 11.5 CD 2007-CD5 0.0

CD 2005-CD1 8.5 CGCMT 2006-C4 14.7 CWCI 2006-C1 14.6 COMM 2007-C9 9.2 CGCMT 2008-C7 22.4

CSFB 2005-C5 5.2 COMM 2006-C7 4.7 COMM 2006-C8 17.3 CSMC 2007-C4 32.8 CSMC 2007-C4 32.8

CSFB 2005-C6 5.1 GCCFC 2006-GG7 3.9 GCCFC 2007-GG9 17.7 CSMC 2007-C3 1.9 GCCFC 2007-GG11 21.0

GMACC 2006-C1 6.1 CSMC 2006-C3 3.0 CSMC 2006-C5 5.0 JPMCC 2007-CB19 9.6 CSMC 2007-C5 12.2

GECMC 2005-C4 18.9 CSMC 2006-C4 2.0 CSMC 2007-C1 1.8 JPMCC 2007-LD11 26.8 CSMC 2008-C1 15.8

GCCFC 2005-GG5 18.5 JPMCC 2006-CB15 2.5 JPMCC 2006-LDP9 3.2 JPMCC 2007-CB20 12.2 JPMCC 2007-C1 12.4

JPMCC 2005-LDP4 5.3 JPMCC 2006-LDP7 7.7 JPMCC 2007-CB18 4.7 JPMCC 2007-LD12 32.3 JPMCC 2007-CB20 12.2

JPMCC 2005-CB13 18.0 JPMCC 2006-CB16 12.9 JPMCC 2006-CB17 4.0 LBCMT 2007-C3 5.6 JPMCC 2007-LD12 32.3

JPMCC 2005-LDP5 10.9 LBUBS 2006-C6 4.7 JPMCC 2007-LDPX 7.7 LBUBS 2007-C2 5.2 JPMCC 2008-C2 10.7

LBUBS 2005-C5 3.6 LBUBS 2006-C4 4.5 LBUBS 2007-C1 11.6 LBUBS 2007-C6 21.5 LBUBS 2008-C1 4.9

LBUBS 2005-C7 7.9 MLMT 2006-C2 15.7 LBUBS 2006-C7 16.6 MLCFC 2007-7 11.9 LBUBS 2007-C6 21.5

LBUBS 2006-C1 9.5 MLCFC 2006-2 9.7 MLCFC 2006-4 7.0 MLMT 2007-C1 28.6 LBUBS 2007-C7 2.9

MLMT 2005-CKI1 6.5 MLCFC 2006-3 12.8 MLCFC 2007-5 29.0 MLCFC 2007-8 13.3 MLCFC 2007-8 13.3

MLMT 2005-LC1 6.1 MSC 2006-IQ11 1.6 MSC 2006-HQ10 3.8 MSC 2007-T27 12.4 MLCFC 2007-9 18.0

MSC 2005-IQ10 1.1 MSC 2006-T23 10.3 MSC 2006-IQ12 4.8 MSC 2007-IQ14 21.6 MSC 2007-IQ15 17.3

MSC 2005-HQ7 4.8 MSC 2006-HQ9 13.0 MSC 2007-HQ11 28.5 MSC 2007-IQ15 17.3 MSC 2007-IQ16 5.0

MSC 2006-T21 13.8 WBCMT 2006-C25 6.6 MSC 2007-T25 9.4 WBCMT 2007-C33 15.9 MSC 2008-T29 10.3

WBCMT 2005-C21 0.0 WBCMT 2006-C27 3.1 MSC 2007-IQ13 14.0 WBCMT 2007-C31 16.3 MSC 2007-HQ13 8.6

WBCMT 2005-C22 6.5 WBCMT 2006-C26 6.8 WBCMT 2006-C29 9.1 WBCMT 2007-C32 14.2 WBCMT 2007-C34 14.2

Average 8.8 Average 8.5 Average 12.6 Average 16.7 Average 15.6

* A-AB that are not required to be paid down before the LCF class do not contribute to the percentage. Source: Credit Suisse, deal documents, Trepp

October’s credit stats show further deceleration In keeping with the recent trend, as well as our expectations, October’s remittance reports

showed further deceleration in the rate of credit deterioration, based on many of the credit

metrics we follow. This is not to say credit improved, but rather that the pace of

deterioration has slowed since earlier this year.

As we discuss further below, by some metrics, the last several remittance reports have

shown the most benign statistics since the most recent downturn began.

We attribute the change to several factors, some of which were to be expected.

Nevertheless, we still believe the most recent reads are positive for the sector and help to

confirm our view that real estate fundamentals have started to stabilize and, at least in

some markets, have started to improve. We discussed the most the recent quarterly

review of these fundamentals in our Market Watch Weekly dated October 10, 2012.

We believe the biggest reason for the sudden change in the rate of new credit

problems is the reduction in conduit loans reaching maturity. A rise in the volume of

2007 vintage loan maturities during the first half of 2012 led us to forecast that “the conduit

delinquency rate will likely tick up in the early part of the year” before stabilizing or falling in

the later part (see our Year Ahead Outlook).

As the level of five-year maturities has started to fall, our expectation was that

delinquencies would “then slowly stabilize and even perhaps head lower in the later part of

the year as these and other loans are modified and liquidated.” In Exhibit 3 we show the

monthly pace of maturities in 2012.


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25 October 2012


Exhibit 3: Expected maturities at the start of 2012 Exhibit 4: Current 2013 maturity profile

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

10+yr

7yr

5yr

$bn

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

10+yr

7yr

5yr

$bn

Source: Credit Suisse, Trepp Source: Credit Suisse, Trepp

In Exhibit 4 we show the anticipated maturities for 2013, which collectively should see

fewer problems compared to the 2012 maturities (for more on this see our article on

2013’s CMBS maturity profile dated September 13 2012).

Another big reason for improvement, at least in some of the headline statistics, is

the resolution of many of the loans in the problem loan bucket through liquidations,

payoffs, and modifications. We believe that some of these resolutions are true

improvements in credit but others are merely optical.

While many of the headline statistics now appear better than they were, we stop

short of arguing there has been an improvement in credit, but we see the shift as

more of a slowdown in the rate of credit deterioration.

To get a clearer picture of credit trends, we try to look past a single month’s results to see

bigger changes. In addition, our analysis of credit extends past the simple headline

numbers of delinquencies and loss severities to see what is driving the changes.

The Conduit Loan Impairment Rate (CLIR)

There are many credit metrics that can be followed and each has advantages and

disadvantages. One of the more popular headline statistics is the overall delinquency rate

(with some using 30+-day and others using 60+-day measures).

While delinquencies are an important component to understanding the current

credit picture, we do not believe that, by themselves, they tell the full story. Just as

important is how loans are transitioning in and out of their respective buckets. Loans can

cure, be modified, or liquidated (often at a loss). Not all of these are positive credit events.

We think an unchanged delinquency rate that is accompanied by a high level of loan

liquidations or modifications is a sign of a deteriorating, rather than a stable, credit

environment. Credit problems will first show as delinquencies in the initial stages of a

credit downturn and attract the most attention. But we are firm believers that liquidations

and mods, which only start to appear later in the cycle, should not be ignored.

We are currently in a period of very high liquidations and modifications, and these

can have a distortive effect on the delinquency rate. Similarly, in a month when

liquidations are lower than the trend, such as they were earlier this year, they can push the

headline delinquency rate up.

https://doc.research-and-analytics.csfb.com/docView?language=ENG&format=PDF&document_id=999709241&source_id=emrna&serialid=fpu3oiZjJc16ZHPI8LCzEHHcsX0Ht8EKBTsDpeP5QkE%3d

25 October 2012


While delinquencies turned up at the end of 2008, liquidations did not start to accelerate

until early/mid 2010. Recently the dollar volume of cumulative liquidations ($57.6 billion)

surpassed the current outstanding delinquencies ($50.3 billion, 60+-days). In fact, as we

show in Exhibit 5, on a dollar basis, 60+-day delinquencies peaked in early 2011. Although

the dollar volume of delinquencies is down from the peak, the percentage, based on the

outstanding balance, is still at a record high level, as the balance of loans has declined

(discussed further below).

Exhibit 5: Liquidations lag delinquencies and create downward pressure

50.3

57.6

0

10

20

30

40

50

60

70

Oct-

07

Ap

r-08

Oct-

08

Ap

r-09

Oct-

09

Ap

r-10

Oct-

10

Ap

r-11

Oct-

11

Ap

r-12

Oct-

12

60+day delinquencies

Cumulative liquidations

$bn


In order to capture the dual influence of delinquencies and liquidations, we have

adapted a simple construct in which we combine the two measures, adding together

the delinquency rate (today’s current problems) and liquidations (credit problems

that have left the CMBS universe). This combination provides what we call the

conduit loan impairment rate (CLIR).

For the delinquency rate, we have chosen to use the current balance of loans that are

60+-days delinquent (which also includes loans in the process of foreclosure, REO, and

non-performing matured balloons). To this measure, we add the balance of loans that

have been liquidated and calculate the conduit loan impairment rate as a percentage of

the original outstanding balance of the universe we are analyzing.

Analysis covers the pre-2010 universe Before we go on and discuss this month’s credit statistics, we also think it is important to

understand and clearly define the universe that one is analyzing, as this can also heavily

influence the calculation of credit metrics.

We focused on the CMBS fixed-rate conduit deals and specifically legacy issuance

(those deals issued in 2008 and earlier). It is easier, in our view, to focus on a fixed set

of deals and loans to make meaningful comparisons over time than an ever-changing

universe (that is one reason why we also like to analyze vintage-level information).

The set of conduit deals we used in our analysis has a current outstanding balance of

approximately $485 billion (and an original balance of $843 billion).

We have seen other measures that incorporate the larger universe of conduit deals,

including those issued over the past three years. Fortunately, at the moment, these newer

vintage deals (issued in 2010 and later) have virtually no serious delinquencies. While

issuance since 2010 has not been significant, adding these deals would increase the

denominator in our calculation and suppress the overall percentages as well as any of the

changes in percentages from month to month. For example, the 60+-day delinquency rate

would fall by about 103 bp with the addition of the new deals, and the month-over-month

change would differ by about 6 bp.

25 October 2012


Furthermore, as new issuance volume

rises and the balance of legacy deals

outstanding continues to contract

(Exhibit 6), the new issuance will have an

even greater impact.

We are, of course, keeping track of the

newer vintages and the relevant credit

statistics as well, but for now, we think it

makes for a cleaner comparison to

segregate them.

The outstanding legacy conduit

balance shrunk by another $5 billion

over the past month, or about 1.0%.

This is in line, but at the lower end of,

the typical range of monthly declines

this year. The current balance of $485

billion, noted above, has fallen more than

10% year-to-date after falling about 11% in

2011 and just 8% in 2010. The total outstanding volume is down one-third from the peak in

December 2007.

We noted in our 2012 Year Ahead Outlook that declining supply remained a positive

fundamental for the sector, but that at some point, if the outstanding balance continued to

shrink, it would hurt liquidity and become a negative technical. Net supply (after

accounting for 2012 issuance) has already fallen $39 billion in 2012, in excess of our start-

of-the-year forecast of $35 billion.

A few of the recent vintage loans fall 30-days delinquent

As we noted above, we are still keeping a careful eye on newly issued deals for problem loans.

This month the Stonebridge Apartment loan in CFCRE 2011-C2 ($11.8 million,1.5% of

deal balance) fell into the 30-day delinquent category. The loan has been with the special

servicer for the past several months. The loan is one affiliated with the Jacobson Ponzi

scheme allegations. This is one three post-2008 loans sponsored by a Jacobson-related

company. As we noted in our most recent update, the receiver has reached a verbal

agreement with a potential buyer for a bulk sale of the properties he now controls. That

auction could take place at the end of February 2013, with a closing in late March,

according to the receiver.

The other two Jacobson-sponsored loans remain current but with the special servicer as of

the latest set of remittance reports.

There are also three loans in 2012 deals that fell into the 30-day delinquent bucket this

month. Two of them are hotels in WFRBS 2012-C8 and are owned by the same company,

Apple REIT Seven. The loans are the Holiday Inn Express Alexandria ($9.4 million,0.7% of

the deal) and SpringHill Suites Alexandria ($12.0 million, 0.9% of the deal). Neither loan is

specially serviced and the notes say the collection is in process. This may be simply a

technical collection problem, as we have seen occasionally, as the deal just priced in July.

The third delinquency is attributable to the Bloomfield and Northshore Self Storage loan in

WFRBS 2012-C7 ($3.2 million and 0.3% of the deal). This loan was put on the watch list

this month as well.

We also note that there is a non-material modification in the Baker Hill Center loan in

JPMCC 2010-C1. The loan, backed by a grocery store-anchored retail property in Glen

Ellyn, IL, was placed on servicer’s watchlist between April 2011 and January 2012 due to

a covenant compliance violation. The loan was modified last month. Few details were

Exhibit 6: Shrinking conduit universe

0

100

200

300

400

500

600

700

800

900

Oct-

00

Oct-

02

Oct-

04

Oct-

06

Oct-

08

Oct-

10

Oct-

12

Original

Current

$bn



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https://doc.research-and-analytics.csfb.com/docView?language=ENG&format=PDF&document_id=993397251&source_id=emrna&serialid=O7gLeaEcK%2bz8xBwJRhN0U5%2fNqjGQ7nAVBJth%2fJs830U%3d

25 October 2012


made available, but it appears that there was a loan assumption with escrow changes.

The property was reported to be acquired by a joint venture between Phillips Edison –

ARC Shopping Center REIT Inc and a division of CBRE Investors.

CLIR sees another small rise in October

The Credit Suisse Conduit Loan Impairment Rate (CLIR) rose only 6 bp in the past

month to 12.8%. This is the second-smallest rise in over a year after August’s 3 bp

increase. It is also the third-smallest increase in the CLIR over the past three years.

Perhaps more importantly, this third straight single-digit rise puts the three-month moving

average increase at the lowest level since the end of 2008. It also shows a clear reversal

of the trend of accelerating increases in the CLIR measure during the first half of this year

(20.3 bp average increase) after moderating in 2011. However, as we discuss below,

much of the first half’s increase may be attributable to maturity defaults. We show the

history of the CLIR in Exhibit 7.

We show the monthly changes in the CLIR (bars) over time, as well as the 6- and 12-

month moving averages, in Exhibit 8. There had been a clear downward trajectory of this

measure since the middle of 2010. Although the averages rose somewhat in the first half

of the year, they remain much closer to the recent lows than the cycle’s highest levels

seen in 2010.

This indicates to us that credit problems continue to grow, and while the rate of new

issuance has increased over the past few months, it is still at a slower pace than

over the previous 12 to 18 months.

Exhibit 7: Conduit Loan Impairment Rate

Exhibit 8: Monthly changes in the CLIR (with 6- and 12-month moving averages)

12.8%

0%

2%

4%

6%

8%

10%

12%

14%

Oct-

06

Oct-

07

Oct-

08

Oct-

09

Oct-

10

Oct-

11

Oct-

12

-20

-10

0

10

20

30

40

50

60

Oct-

06

Ap

r-07

Oct-

07

Ap

r-08

Oct-

08

Ap

r-09

Oct-

09

Ap

r-10

Oct-

10

Ap

r-11

Oct-

11

Ap

r-12

Oct-

12

Change (bp)

6-month moving avg

12-month moving avg


Mod-CLIR confirms the trends

In early August we introduced Mod-CLIR, an enhancement to the CLIR calculation that

takes into account loan modifications as well as liquidations. While modified loans

are often reported as current, many of them are not performing as originally intended and

we believe are credit impaired. A good example is the Beacon Seattle & DC portfolio loan

that we have discussed numerous times since it was modified back in December. The

loan’s change in payment and accrual rate has resulted in large periodic shortfalls to the

five trusts that have exposure (see our October 4, 2012 CMBS Market Watch for the latest

on the Beacon loan). Despite not performing as originally anticipated, the loan was never

classified as delinquent, and therefore did not show up in traditional delinquency measures

(or in our CLIR metric).

https://doc.research-and-analytics.csfb.com/docView?language=ENG&format=PDF&document_id=991559271&source_id=emrna&serialid=gwQabYAwHFAytLDc8qkObrP2DRSYlkLzbDqF7Vj91m4%3d

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25 October 2012


In summary, our new Mod-CLIR measure incorporates loans that have been modified with

respect to their monthly payments but would not otherwise be captured in our CLIR

measure. Loans that have received only a maturity modification are not included. (We

have also developed a Hope-CLIR rate that only includes A/B note split modifications).

In Exhibit 9 we compare the mod-CLIR rate to the traditional CLIR measure as well as the

two measures of 60+-day delinquencies.

Exhibit 9: Comparison of delinquency and CLIR Exhibit 10: Monthly changes in CLIR and Mod-CLIR

15.0%

12.8%

10.4%

6.0%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Oct-

07

Ap

r-08

Oct-

08

Ap

r-09

Oct-

09

Ap

r-10

Oct-

10

Ap

r-11

Oct-

11

Ap

r-12

Oct-

12

Mod-CLIR

CLIR

60+day Dlq (Cur Bal)

60+day Dlq (Orig Bal)

-20

-10

0

10

20

30

40

50

Ap

r-11

Jul-

11

Oct-

11

Jan

-12

Ap

r-12

Jul-

12

Oct-

12

CLIR Mod-CLIRbp


Exhibit 10 shows the monthly changes in the traditional CLIR and the Mod-CLIR rate. It

shows that October’s Mod-CLIR read was one of the lowest since in the past several years.

This month the rise in the two CLIR rates were very similar, but differences do occur. For

example, in August the Mod-CLIR rate captured two larger loans that were modified that

month but were less than 60-days delinquent at the time: Design Center of America and

the Colony IV Portfolio.

60+day delinquencies fall for the third straight month The 60+-day delinquency rate across our legacy conduit universe fell 6 bp in

October, the third consecutive decline. This brings the three-month change to down 27

bp. As we noted last month, there had not been a back-to-back decline in the headline rate

since the middle of 2007.

The overall rate now stands at slightly under 10.4% (as a percentage of the current

balance)1, down from July’s all-time high rate of 10.6%. In comparison, the average rise

over the first half of the year was 17 bp per month. The average rise over the last three

quarters of 2011 was just 4 bp per month.

Headlines of some articles will highlight the record high levels (on the negative

side), or the sharp change in direction (on the positive side). We believe it is

important to emphasize that the increase earlier this year and this month’s change

are not a surprise and are consistent with our expectation. In discussing the credit

environment in our 2012 Year Ahead Outlook we wrote, “Our conclusion is that the conduit

delinquency will likely tick up in the early part of the year due to the difficulty of refinancing

maturing loans but then slowly stabilize and even perhaps head lower in the later part of

the year as these and other loans are modified and liquidated.”

1 We find value in looking at delinquencies as both a percentage of original and current balances. For the CLIR measure, we use

the original balance to keep it on the same basis as liquidations. The percentage of current balance is a better measure of where we are today, a snapshot in time.

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25 October 2012


Matured loans are the big driver of the delinquency rate

The increase in the non-performing maturity loan bucket explained approximately 40% of

the rise in delinquencies in the first half of the year and about 60% of the rise in the 12

months ending in June. We show the growing effect of this bucket in Exhibit 11.

Exhibit 11: Non-performing matured loans driving up the 60+day rate

9.28%

1.09%

0%

2%

4%

6%

8%

10%

12%

Jul-

08

Oct-

08

Jan

-09

Ap

r-09

Jul-

09

Oct-

09

Jan

-10

Ap

r-10

Jul-

10

Oct-

10

Jan

-11

Ap

r-11

Jul-

11

Oct-

11

Jan

-12

Ap

r-12

Jul-

12

Oct-

12

60-day/90+day/FCL/REO Non-perf matured balloon10.38%


It also shows how the non-performing matured bucket has been responsible for the total

delinquencies starting to decline over the past couple of months. That bucket has fallen

from a peak percentage of 1.5% in June to 1.1% in October. This has been partially, but

not fully, offset by the 14 bp increase in the other delinquency categories.

While the non-performing loan bucket remains large, as the loans are resolved over the

next few months, the impact should start to wane as well. The size of this bucket has

already fallen by 30% over four months.

The waning impact of the non-performing matured loans can also be seen when we look

at the largest loans that rolled into the 60+-day bucket in October, as shown in Exhibit 12.

Only one of the top five loans transitioning this month has a recent maturity date.

Exhibit 12: New 60+-day delinquencies in October 2012

Loan name Deal CMBX

Current bal

($mn)

Deal bal (%)

Loan status

Special serv. tr.

date

Paid thru date

Maturity date

Prop type City, State

1 The Belnord JPMCC 2006-LDP9 CMBX3 375 8.7% 60 Days 06/11 07/12 11/16 MF New York, NY

2 Bank One Center WBCMT 2007-C30 178 2.5% FCL 05/11 08/12 01/17 OF Dallas, TX

3 CityPlace Corporate Center JPMCC 2005-LDP2 115 6.1% Non Perf Mat 04/12 09/12 11/12 MU Creve Coeur, MO

4 Hulen Mall MSC 2005-IQ9 105 8.9% Non Perf Mat* 09/12 06/15 RT Fort Worth, TX

5 Simon - Cheltenham Square Mall BACM 2004-5 53 9.9% 60 Days 06/12 07/12 07/14 RT Philadelphia, PA

Source: Credit Suisse, Trepp *The remittance report shows Hulen Mall as non-performing matured but we understand that the maturity date has been extended to June 2015 and we believe this delinquency category may be misclassified in the remittance reports.

Going into the start of 2012, the headline delinquency statistic had actually fallen in four of

the prior eight months and the rate of increase had started to slow (Exhibits 13 and 14).

We once again emphasize that the overall delinquency rate is a net number and can mask

flows into and out of the delinquency bucket.

25 October 2012


Exhibit 13: 60+-day delinquency declining again Exhibit 14: Month-to-month change in 60-day dlq

10.38%

0%

2%

4%

6%

8%

10%

12%

Oct-

08

Ap

r-09

Oct-

09

Ap

r-10

Oct-

10

Ap

r-11

Oct-

11

Ap

r-12

Oct-

12

-40

-20

0

20

40

60

80

Oct-

08

Ap

r-09

Oct-

09

Ap

r-10

Oct-

10

Ap

r-11

Oct-

11

Ap

r-12

Oct-

12

bp


Loans transitioning into the 60+-day bucket in October totaled just $2.2 billion.

While this is up slightly from last month’s $2.1 billion, it is one of the lowest

monthly reads since March 2009 and below the recent range over the prior year

($3.0 billion to $4.0 billion). This is shown by the reddish bars (above the line) in

Exhibit 15. This graph shows that on a dollar basis, there has still been a hefty volume of

loans becoming 60+-days delinquent in each of the past several months.

The two stacked bars below the zero line represent the outflows. These consist of loans

leaving the delinquency bucket, which remain either outstanding (cured or modified) or

were liquidated. The light blue bar – the cured/modified loans – totaled $1.5 billion, which

is at the low end of the range for this year ($1.3 billion to $2.2 billion between 4Q 2011 and

2Q 2012). The other component, shown by the dark blue bar, is liquidated/disposed loans,

which accounted for $1.52 billion of 60+-days delinquency leaving the bucket. This

liquidation rate is back up after having slowed considerably earlier in the year. We discuss

liquidations in more detail in the section below.

Exhibit 15: October’s 60+-day inflow at $2.2 billion, just slightly above last month’s

2.0 1.9 1.4 1.6 1.6 2.0 2.11.3 1.5

0.7 0.8 1.41.7 1.6

1.6 1.9

1.7 1.5

3.1 3.3 4.13.1

4.13.0 2.8 2.1 2.2

10.4%

-9%

-6%

-3%

0%

3%

6%

9%

12%

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

Oct-

10

Nov-1

0

Dec-1

0

Jan

-11

Feb-1

1

Mar-

11

Ap

r-11

May-1

1

Jun

-11

Jul-1

1

Au

g-1

1

Se

p-1

1

Oct-

11

Nov-1

1

Dec-1

1

Jan

-12

Feb-1

2

Mar-

12

Ap

r-12

May-1

2

Jun

-12

Jul-1

2

Au

g-1

2

Se

p-1

2

Oct-

12

New 60+-day delinquency ($bn) Liquidated/Paidoff

Cured / Become less than 60+-day 60+-day delq rate (RHS)

CurL

$bn

CurLCurLCurLCurLCurLCurLCurL


2 The liquidations here tally to slightly less than the total volume liquidated in the month because some loans were liquidated, at a

loss, without being delinquent in the month prior to disposition.

25 October 2012


First time delinquencies

In our 60+-day bucket, we include not only loans more than 60-days delinquent, but also

REO loans, non-performing matured balloons, and loans tagged as in foreclosure. This

last category has caused some volatility in the series, especially related to the tagging of a

few big loans. We think the tagging issue can cause distortions in the headline number.

To address this issue, we have

developed a series that measures the

amount of loans becoming delinquent

for the very first time.

A loan that becomes delinquent, cures,

and then becomes delinquent again (what

we call a repeat offender) is only counted

once, on the first delinquency occurrence,

not on the second.

October saw another $1.1 billion loans fall

into the 60+-day delinquency bucket for

the first time, on par with last month’s total.

This is the lowest amount since the end of

2008 and well below the recent pace in the

range of $1.8 billion to $2.5 billion a month.

We show the first-time delinquencies as

well as the six-month moving average in

Exhibit 16.

It is apparent from this statistic that the inflow of new credit problems continues, but there

are signs that the pace may be moderating.

30-day delinquencies steady but PSS sees increase

Although we have found that there is a meaningful increase in risk once a loan crosses

into the 60-day delinquent territory, we still keep a careful eye on 30-day delinquencies

and the performing specially serviced loan trends as early warning signs of potentially

more serious credit issues.

Headline delinquency measures that include the 30-day delinquent bucket will show an

even larger decline than our 60+-day rate this month, as that rate plunged 8 bp in October.

The 30-day delinquency, although volatile, has generally trended down since the middle of

2010 (Exhibit 17). This month, the percentage 30-days delinquent fell to 0.52%. While we

analyze the credit statistics each month, they can be volatile and we look for longer-term

trends rather than placing excessive weight on one-month moves. As the moving average

line in the exhibit shows, the 30-day delinquency rate has generally been falling, although

is slightly higher than the recent June low.

Exhibit 16: First-time delinquencies

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Oct-

09

Jan

-10

Ap

r-10

Jul-

10

Oct-

10

Jan

-11

Ap

r-11

Jul-

11

Oct-

11

Jan

-12

Ap

r-12

Jul-

12

Oct-

12

Loans becoming60+day for the first time

6-mth moving avg

$bn


25 October 2012


Exhibit 17: 30-day delinquencies generally fell Exhibit 18: Performing specially serviced steadied

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%O

ct-

08

Ap

r-09

Oct-

09

Ap

r-10

Oct-

10

Ap

r-11

Oct-

11

Ap

r-12

Oct-

12

30-day %

6-Month Mavg

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

Oct-

08

Ap

r-09

Oct-

09

Ap

r-10

Oct-

10

Ap

r-11

Oct-

11

Ap

r-12

Oct-

12

PSS %

6-Month Mavg


We also follow the loans in special servicing that are not delinquent. This statistic, which

was fairly stable for some time (between 3.1% and 4.0%), fell rapidly from 3.8% in June

2011 to 2.2% in July this year, including June’s 60 bp fall. By only following the performing

specially serviced (PSS) loans, we avoid any double-counting issues. This bucket is much

larger than the 30-day delinquency bucket and currently stands at 2.4% of the conduit

universe, steady month-over-month.

In dollar terms the performing specially serviced loans rose to $11.6 billion in October from

$10.9 billion three months ago and $19.1 billion in February. A broader measure of

distress that includes PSS and 30+-day delinquencies ticked down 18 bp over the past

month, with the total percentage equaling to 13.3% of the outstanding balance.

We show the five largest loans moving to the special servicer over the past month in

Exhibit 19. The largest two loans, Lowe Tyson’s Corner (MLMT 2005-CKI1) and 17 Battery

Place North (WBCMT 2005-C16), both have upcoming maturities.

Exhibit 19: Transferred to special servicing in October 2012

Loan name Deal CMBX Current

bal ($mn) Deal

bal (%) Loan status

Special serv. tr. date

Paid thru date

Maturity date

Prop type City, State

1 Lowe Tyson's Corner MLMT 2005-CKI1 CMBX1 64 2.9% Cur 09/12 10/12 11/12 OF Vienna, VR

2 17 Battery Place North WBCMT 2005-C16 53 4.2% < 30 Days 09/12 09/12 11/12 OF New York, NY

3 Marriott Overland Park JPMCC 2007-LD12 CMBX4&5 47 2.2% < 30 Days 09/12 08/12 08/14 LO Overland Park, KS

4 Laurel Springs Apartments Portf. CSMC 2007-C2 41 1.5% 30 Days 09/12 08/12 03/17 MF High Point, VR

5 NJ Industrial & Office Pool WBCMT 2007-C30 40 0.6% < 30 Days 09/12 09/12 02/17 MU Various, NJ


Liquidation levels remain high but drop slightly in October

As we noted in an earlier section, we believe the level of liquidations is a key component

to understanding delinquency trends. The obvious reason is that liquidations result in

realized losses to the trust, but a more subtle reason is that liquidations affect the level

and trajectory of delinquencies.

Total liquidations came in at $1.4 billion in October. This is noticeably lower than the

pace over the past several months, which has stayed remarkably steady between $1.7

and $1.8 billion. The year-to-date monthly average as well as the average monthly level

for all of 2011 are close to $1.5 billion per month.

25 October 2012


We still think that with the large pipeline of problem loans we will see the pace of

liquidations remain high over the coming months. We believe one of the factors that led to

an increase in the amount reported as liquidated, compared to earlier in the year, was a

resumption of the note and property auctions held by special servicers. (See our recent

discussion on the upcoming auction calendar published two weeks ago).

Liquidations reported in October represent about 28 bp of the entire outstanding legacy

conduit universe. We show the monthly liquidation amount, as well as the six-month

moving average in Exhibit 20 and have highlighted October’s data points.

Exhibit 20: Liquidations remain high but drop in October

0

500

1,000

1,500

2,000

2,500

Oct-04 Oct-05 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12

6-mth moving average

Liquidation bal

$mn


The monthly volume of liquidations has certainly not been consistent; thus, we have also

included a six-month moving average metric. Although we believe liquidations in 2012 will

surpass last year’s total, in our 2012 Year Ahead Outlook we raised the possibility that

special servicers might be reaching capacity constraints on the monthly volume. Year-to-

date there have been $15.5 billion in liquidations compared to $13.8 billion in the same

period last year.

Over the past 12 months, $18.8 billion of conduit loans have left the universe through

liquidations. This represents about 3.4% of the outstanding conduit universe. If we look at

liquidations this way, it is easy to see how they are exerting a downward draft on the

overall level of delinquencies.

We count 138 loans (or components) that were liquidated in October, and we list these at

the end of this report in Exhibit 39. This is also the smallest volume since March.

Unlike last month however, several of the largest loans liquidated this month suffered

significant losses. For example, the largest loan reported as liquidated was Everett Mall

Steadfast (in MSC 2007-IQ14) with a 50% loss severity. This was followed by City View

Portfolio I (JPMCC 2006-CB16), where the loss totaled over 100%. We show the largest

liquidations in October in Exhibit 21.

Exhibit 21: Largest loans reported liquidated in October

Loan Deal Original Balance

Balance at Liquidation

Loss Amount ($ millions) Maturity Date Loss % Orig Loss % Curr

Everett Mall Steadfast MSC 2007-IQ14 98.0 98.0 49.1 5/1/2017 50.1% 50.1%

City View Portfolio 1 JPMCC 2006-CB16 72.8 69.0 69.6 8/1/2016 95.6% 100.8%

Towers at Park Central LBUBS 2007-C1 64.0 64.0 0.7 1/11/2012 1.0% 1.0%

Lightstone Portfolio JPMCC 2006-CB15 73.9 62.5 56.7 7/1/2016 76.7% 90.8%

Powers Ferry Landing East JPMCC 2006-LDP7 50.0 48.3 35.9 12/1/2012 71.9% 74.4%











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25 October 2012


Loss severities tick slightly higher

As the above examples demonstrate, it is not only the level of liquidations, but also the

loss to the trust that results from the dispositions that is important for credit.

Given the exhibit above, which shows some large losses on the biggest liquidations, it is

no surprise that the headline loss severity trended higher over the past month. But loss

severities can be somewhat volatile month-to-month. To get a better sense of the trend,

we prefer to look at them on a six-month rolling average basis, which we do in Exhibit 22,

as both a percentage of original balance and percentage of current balance.

Loss severities, which rose going into the last half of 2011, have trended down for

most of this year. However, the moving average has started to edge higher over the

past two months. In October, the average loss severity (as a percentage of original

balance) was 38%.

Exhibit 22: Conduit loss severities slight increase Exhibit 23: Ex-“low-loss” severities are higher

10%

20%

30%

40%

50%

60%

Oct-

02

Oct-

03

Oct-

04

Oct-

05

Oct-

06

Oct-

07

Oct-

08

Oct-

09

Oct-

10

Oct-

11

Oct-

12

Loss severity (% disposed bal)

Loss severity (% orig bal)

10%

20%

30%

40%

50%

60%

70%

Oct-

02

Oct-

03

Oct-

04

Oct-

05

Oct-

06

Oct-

07

Oct-

08

Oct-

09

Oct-

10

Oct-

11

Oct-

12

Loss sev: ex "low-loss" (6-mth average)

Loss sev: all


However, as with other credit statistics, the headline number can, at times, be misleading.

We have in the past presented the idea of adjusting severities to account for loans with

low losses (such as those that suffer a loss solely because of special servicing and other

fees and are not in real distress). The Towers at Central in Exhibit 21 is an example.

We define a low-loss severity loan as one where the loss is less than 3%. In October,

about 30% of the loans liquidated, by balance, qualified as low-loss severity. This is less

than the 34% year-to-date total but above the 26% total over all of 2011.

In addition, the average loss severity (after excluding the low-loss severity loans) was

54% in October, on the higher end of the range over the past few years, although

below August’s severity. In Exhibit 23, we show loss severities, again on a six-month

rolling basis, for the “ex-low-loss severity” loans and compare that to the headline number

(labeled “all” on the chart). The changes, over time, in the ex-low loss severity have been

generally far more muted, although that has changed over the past three months. The

moves in the headline number reflect the changing percentage of low-loss severity

liquidations more so than changes in the loss severity of truly distressed assets.

The 2006 cohort edged out the 2007 deals as the largest contributor to loan liquidations

and losses in October. Despite the view that 2007 loans were more highly levered, the

overall loss severities have not differed dramatically from the 2006 vintage. In fact, as we

show in Exhibit 24, loss severities for the 2006 vintage have been running higher than

those in 2007. We have previously discussed how maturing loans generally have lower

severities as well. We continue to see that trend persist this month (Exhibit 25).

25 October 2012


Exhibit 24: Ex-low loss severities by vintage (six-month running average)

Exhibit 25: Maturing loans have lower severities

30%

35%

40%

45%

50%

55%

60%

65%

70%

Ap

r-10

Jun

-10

Au

g-1

0

Oct-

10

Dec-1

0

Fe

b-1

1

Ap

r-11

Jun

-11

Au

g-1

1

Oct-

11

Dec-1

1

Fe

b-1

2

Ap

r-12

Jun

-12

Au

g-1

2

Oct-

12

2007

2006

2005

0%

10%

20%

30%

40%

50%

60%

Oct-

07

Ap

r-08

Oct-

08

Ap

r-09

Oct-

09

Ap

r-10

Oct-

10

Ap

r-11

Oct-

11

Ap

r-12

Oct-

12

Outside 6 months Within 6 months


2012 maturing loans better than expected

We believe the payoff rate for 2012 maturities has, to date, largely exceeded the market’s

low expectations. While this is true for the entire set of loans, it also applies specifically to

the more worrisome 2007 cohort. We update our table of payoff statistics in Exhibit 26.

Exhibit 26: Status of 2012 maturities by loan term through October

5-Yr Term 7-Yr Term 10+-Term Total

Paid On Time 35.7% 59.6% 79.5% 55.0%

Paid Post Maturity 16.7% 15.6% 6.9% 13.3%

Total Paid 52.5% 75.1% 86.4% 68.3%

Liquidated 4.7% 3.6% 2.0% 3.6%

Extended 8.3% 3.2% 1.3% 4.9%

Outstanding Post Maturity 34.5% 18.1% 10.2% 23.2%

Total Not Paid 47.5% 24.9% 13.6% 31.7%


By our count, about 68% of loans set to mature in the first ten months of the year

paid off successfully. Of those that did not, a small number were extended or liquidated,

but most remain outstanding past their scheduled maturity.

The payoff rate for the five-year term loans was lower, but still totaled 52%. As we had

anticipated, the payoff rate for the 10-year loans was much higher (86%), with the 7-year

maturities falling in the middle (75%).

As reminder, our statistics are based on a pool of loans scheduled to mature in 2012 that

were still outstanding in October 2011. This method allows us to capture loans that

prepaid in the period leading up to the maturity date. We have seen other analyses that do

not capture these prepays and as such underestimate the ability of these loans to

refinance. In fact about one-third of the 5-year maturity loans and more than half of all the

conduit loans prepaid prior to maturity.

October brought an estimated $3.5 billion of scheduled loan maturities (as of October last

year). As of the start of the year, November’s maturities were estimated at $3.0 billion. The

good news is that we have already seen $1.7 billion of these loans (about 54% of what

was scheduled) already prepay.

25 October 2012


We show in Exhibit 27, the three loans with balances greater than $50 million coming due

next month that have not already paid off.

Exhibit 27: Larger loans coming due next month

Deal Loan Bal ($mn) Deal (%) Status Transfer to Special

MLMT 2005-CKI1 Lowe Tyson's Corner 63.6 2.9% current – special 9/2012

WBCMT 2005-C16 17 Battery Place North 53.0 4.2% current – special 9/2012

GCCFC 2002-C1 Jamaica Center 51.9 31.1% current - watch


Shortfalls continue at a steady pace

In addition to overall delinquency and liquidation statistics, we also track how problem

loans are affecting the trusts overall. For example, as of the latest remittance period, about

$47.1 billion in loans had some associated appraisal reduction amount. This includes $1.1

billion that had an ASER accumulation reported for the first time in October.

These appraisals, as well as modifications and special servicing fees, are contributing to a

growing amount of interest shortfalls. The shortfalls have been steadily increasing over the

past year.

We did an analysis of shortfalls last year and concluded that that, while shortfalls

are increasing each month, they are not only less likely to affect classes with higher

levels of credit enhancement (such as AJs and AMs), but that when they do, they

tend to get reimbursed fairly quickly.

We calculate that, in October, conduit interest shortfalls increased by $77 million, raising

the total shortfall, across the universe, to $3.0 billion (Exhibit 28). The rise over the past six

months has been very consistent (in the range of $70 to $80 million a month), with the 12-

month running average at $76 million.

As we discussed in our piece on shortfalls, while some deals see increased shortfalls in a

given month, loan resolutions and ASER reimbursements can temporarily drive shortfalls

lower on other transactions.

The balance of bonds with shortfall decreases totaled $45 million in October (the gray line

in Exhibit 29), in keeping with the year-to-date average. In the meantime, the balance of

bonds with shortfall increases totaled $123 million, also near the 2012 average.

Exhibit 28: Cumulative shortfalls hit $3.0 bn Exhibit 29: Increases in shortfalls and recoveries

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Oct-

07

Ap

r-08

Oct-

08

Ap

r-09

Oct-

09

Ap

r-10

Oct-

10

Ap

r-11

Oct-

11

Ap

r-12

Oct-

12

$bn

-

20

40

60

80

100

120

140

Oct-

07

Ap

r-08

Oct-

08

Ap

r-09

Oct-

09

Ap

r-10

Oct-

10

Ap

r-11

Oct-

11

Ap

r-12

Oct-

12

Increases

Decreases

$mn


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25 October 2012


The net effect is that we are still seeing an increasing number of classes experiencing

shortfalls, although many are temporary and short-lived. These shortfalls are reaching

higher up the capital stack. In fact, about 33% of the originally rated single-A classes (A- to

A+) are currently experiencing shortfalls and similarly, about 17% of the double-A conduit

classes (AA- to AA+) had an interest shortfall in October, more than double the proportion

a year ago.

Even as shortfalls have continued to accumulate some are getting repaid. For example,

the AMS class of JPMCC 2006-LDP9 incurred a shortfall in August but that has, over the

last two months, been repaid, in full. That leaves JPMCC 2008-C2 as the sole remaining

AM to have a shortfall (for now).

As we have stated previously, we believe the modification of the Westin Portfolio loan will

result in persistent shortfalls to this tranche over the near term. (The loan has a $102.5

million piece in this deal, or 9.8%, as well as a $103.4 million piece in JPMCC 2007-C1,

which represents 9.2% of that deal).

We list in Exhibit 30 the deals that had a shortfall in October at the double-A level or

higher. This includes 16 deals where an original triple-A bond experienced a shortfall, the

same number as in September. Each of these shortfalls hit the AJ tranche except for the

above-mentioned JPMCC 2008-C2 deal, which had shortfalls at the AM level.

Despite the high number of shortfalling classes that were originally rated triple-A, our case

about generally rapid repayment of shortfalls at the top of the capital stack still holds. This

month only the CD 2006-CD AJs recouped its prior shortfall and fell off the list. However,

the shortfalls on GSMS 2007-GG10 reached the AJ class again in October.

Exhibit 30: Conduit deals with interest shortfalls at double-A (original ratings) or higher

Deal Name CMBX Class Name

Orig Rating Deal Name CMBX

Class Name

Orig Rating Deal Name CMBX

Class Name

Orig Rating

JPMCC 2008-C2 CMBX5 AM AAA MLCFC 2007-8 CMBX4&5 AJA AAA LBUBS 2007-C7 CMBX5 C AA

BSCMS 2007-PW15 CMBX3 AJ AAA MLMT 2007-C1 CMBX4 AJ AAA MSC 2006-IQ12 CMBX3 C AA

BSCMS 2007-PW15 CMBX3 AJFL AAA MLMT 2007-C1 CMBX4 AJFL AAA WBCMT 2007-C30 * C AA

CSFB 2005-C2 AJ AAA MSC 2007-HQ13 CMBX5 AJ AAA BSCMS 2006-T24 C AA-

CSMC 2007-C1 CMBX3 AJ AAA GCCFC 2007-GG9 CMBX3 B AA+ BSCMS 2007-PW16 * CMBX4 D AA-

CWCI 2006-C1 CMBX3 AJ AAA BACM 2006-3 * CMBX2 B AA CD 2006-CD2 D AA-

GECMC 2007-C1 AJ AAA BACM 2006-5 * CMBX2 B AA CD 2007-CD4 CMBX3 D AA-

GECMC 2007-C1 AJFL AAA BACM 2007-1 * CMBX3 C AA CGCMT 2008-C7 * CMBX5 D AA-

GSMS 2007-GG10 * AJ AAA COMM 2004-LB4A B AA CMLT 2008-LS1 * D AA-

JPMCC 2006-CB17 CMBX3 AJ AAA COMM 2006-C8 CMBX3 C AA COMM 2006-C7 CMBX2 C AA-

JPMCC 2006-LDP9 CMBX3 AJS AAA CSMC 2006-C4 * CMBX2 C AA CSMC 2006-C5 CMBX3 D AA-

LBUBS 2007-C2 CMBX4 AJ AAA CSMC 2007-C2 C AA GECMC 2005-C1 C AA-

MLCFC 2007-5 CMBX3 AJ AAA CSMC 2007-C3 CMBX4 C AA JPMCC 2007-LD11 CMBX4 D AA-

MLCFC 2007-5 CMBX3 AJFL AAA CSMC 2007-C5 * CMBX5 C AA JPMCC 2007-LDPX CMBX3 CS AA-

MLCFC 2007-6 AJ AAA GCCFC 2005-GG5 * CMBX1 B AA LBUBS 2005-C2 D AA-

MLCFC 2007-6 AJFL AAA GECMC 2006-C1 B AA MSC 2007-HQ12 * C AA-

MLCFC 2007-7 CMBX4 AJ AAA GMACC 2005-C1 * B AA MSC 2007-IQ14 CMBX4 D AA-

MLCFC 2007-7 CMBX4 AJFL AAA JPMCC 2002-CIB4 B AA WBCMT 2007-C31 * CMBX4 D AA-

MLCFC 2007-8 CMBX4&5 AJ AAA JPMCC 2005-CB13 * CMBX1 B AA WBCMT 2007-C33 * CMBX4 D AA-

* Did not shortfall last month Source: Credit Suisse, Trepp

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25 October 2012


Vintages show differences in performance

While the overall conduit universe delinquency, liquidation, and CLIR numbers are

important, we believe they can mask some of the more subtle changes that are occurring

at the cohort level. In Exhibits 31 and 32, we show the delinquency percentages and

CLIRs for the most recent legacy vintages.

While the results are not surprising (generally the later vintages are underperforming),

the dispersion between them is rather stark. These five vintages make up approximately

83% of the outstanding conduit universe (91% of the legacy universe).

Exhibit 31: Vintage level delinquencies Exhibit 32: Vintage level CLIR

0%

2%

4%

6%

8%

10%

12%

14%

16%

Oct-

09

Ap

r-10

Oct-

10

Ap

r-11

Oct-

11

Apr-

12

Oct-

12

2008

2007

2006

2005

2004

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Oct-

09

Ap

r-10

Oct-

10

Ap

r-11

Oct-

11

Ap

r-12

Oct-

12

2008

2007

2006

2005

2004


The 2007 and 2008 delinquency rate fell sharply over the past month with declines of 43

and 53 bp, respectively. The 2007 cohort had delinquencies peak in June at 14.5% but

since then they have fallen each month with a cumulative decline of 79 bp.

Once again the decline is largely explained by the bucket of non-performing matured

balloon loans. The proportion of these loans ramped up from just 27 bp at the end of last

year to a peak of 2.7% in June. Since then they have fallen to 1.45%.

However, once again the delinquency

rate does not tell the entire story. While

the CLIR rate fell 17 bp for the 2007

vintage in the latest month, the Mod-CLIR

was down just 3 bp. This leads us to

conclude that liquidations and

modifications are masking the larger

changes in the delinquency rate. The

2007 Mod-CLIR is just below last month’s

all-time high watermark (Exhibit 33).

The 2006 vintage deals experienced a 16

bp rise in the delinquency rate and the

Mod-CLIR rose 18 bp.

This supports our notion that CMBS

conduit credit on these vintages continues

to deteriorate, but the pace has

moderated.

Exhibit 33: Vintage 2007 various stats

24.2%

18.0%

13.7%

0%

5%

10%

15%

20%

25%

30%

Oct-

07

Oct-

08

Oct-

09

Oct-

10

Oct-

11

Oct-

12

Mod-CLIR

CLIR

60+day Dlq(Cur Bal)


25 October 2012


CMBX.4 problems continue to rise

We perform a similar type of analysis, but instead of grouping by vintage year, we look at

CMBX cohorts. There are some clear differences in performance, but for the most part

they align well with both the vintage performances and market expectations.

Exhibit 34: CMBX delinquencies Exhibit 35: CMBX CLIR

0%

2%

4%

6%

8%

10%

12%

14%

16%

Oct-

08

Ap

r-09

Oct-

09

Apr-

10

Oct-

10

Ap

r-11

Oct-

11

Ap

r-12

Oct-

12

CMBX5 Delinq

CMBX4 Delinq

CMBX3 Delinq

CMBX2 Delinq

CMBX1 Delinq

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Oct-

08

Ap

r-09

Oct-

09

Ap

r-10

Oct-

10

Ap

r-11

Oct-

11

Ap

r-12

Oct-

12

CMBX5 CLIR

CMBX4 CLIR

CMBX3 CLIR

CMBX2 CLIR

CMBX1 CLIR


As the exhibits show, CMBX.1 remains the best performing series, while CMBX.3 is by far

the worst. The other indices fall in the middle, and the performance is fairly similar when

measured in terms of total delinquencies and on a CLIR basis. We have long stated that

we were surprised at the relatively strong performance of CMBX.5, as we do not view the

quality as meaningfully different from series 4 and worse than series 2 and 3.

The CLIR metrics for series 4 and series 5 both improved in October, while the earlier

three series continued to deteriorate. This reverses a trend for CMBX.5 deals, which was

the greatest underperformer in the prior three months.

Some of the increase in problems in series 3 in the first part of the year was directly

related to loan maturities. In prior reports we have hypothesized that this issue would

subside and would switch to the CMBX.4 cohort. We are now at the tail of this process and

the rates between these two cohorts should normalize in the coming months.

Mixed readings by property type

We show the history of 60+-day delinquencies and the conduit loan impairment rate by

property type in Exhibits 36 and 37. Unlike last month, where changes in credit were

relatively even across property types, in October there were large shifts.

The office sector had been one of the underperformers in recent months, but that reversed

in October. Delinquencies fell 24 bp on the month and the CLIR rate fell 2 bp. Similarly

hotel delinquencies were also down 16 bp on the month, while the CLIR for this sector was

up 2 bp. Retail and multifamily fared less well.

Multifamily loans were October's weakest performers, as the delinquency rate rose 32 bp

and the CLIR was up 46 bp. We attribute this to the $375 million Belnord loan in JPMCC

2006-LDP9 (8.7% of the deal). The loan has once again moved back into the 60-day

delinquency bucket.

Retail delinquencies were up only 2 bp, while the retail CLIR rate rose 11 bp.

25 October 2012


Exhibit 36: Property type delinquencies Exhibit 37: Property type CLIR

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%O

ct-

09

Ap

r-10

Oct-

10

Ap

r-11

Oct-

11

Ap

r-12

Oct-

12

60

+d

ay d

lq

Multifamily Hotel

Office Retail

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Oct-

09

Ap

r-10

Oct-

10

Ap

r-11

Oct-

11

Ap

r-12

Oct-

12

Multifamily Hotel

Office Retail


Reported modifications continue to pile up

Modifications are another important aspect of the overall credit picture and one we believe

has not only affected value over the past year but will continue to play an important role in

the coming years as well.

By our count, $46.7 billion of conduit loans have received a material modification (which

we define as affecting the timing or amount of a loan’s cash flow). With such a large

bucket of distressed assets still to work through, we believe modifications will continue to

exert a strong influence on credit dynamics.

We show the amount of modifications in Exhibit 38. In our analysis, we grouped

modifications by the date of the mod, rather than the reported date. As a result, Exhibit 38

may understate the number of mods for the most recent months, as some may not have

been reported as of yet. These numbers will likely be restated higher on upcoming

remittance reports over the next several months as more modifications are reported.

Exhibit 38: Conduit loan modifications by modification date ($ billions)

0

10

20

30

40

50

60

70

80

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Oct-

09

Dec-0

9

Fe

b-1

0

Ap

r-10

Jun

-10

Au

g-1

0

Oct-

10

De

c-1

0

Fe

b-1

1

Ap

r-11

Jun

-11

Au

g-1

1

Oct-

11

De

c-1

1

Fe

b-1

2

Ap

r-12

Jun

-12

Au

g-1

2

Oct-

12

666 Fifth Beacon

GGP All Other

Count (RHS)

$bn Count

Source: Credit Suisse, the BLOOMBERG PROFESSIONAL™ service, Trepp, various trustee and servicer reports

25 October 2012


In fact, we have only seen $53 million loans tagged as modified in October. Even though

we expect this to be revised higher in future months as more loans are reported, this still

represents a very low relative number. July’s modification total, for example, was initially

reported at $386 million but has since been revised upward to $617 million. The initial

number report last month, for September modifications, was $50 million and we have now

revised that upward to $176 million.

Even so, the pace of modifications has appeared to trail off during the first part of 2012. In

the first eight months, we saw average monthly volume of a little less than $750 million a

month (not including the last two months). A typical month has seen between $500 million

and $700 million, with a peak of $1.2 billion in May. By contrast, 2011 had a monthly

average of $1.2 billion.

So far only five loans have been reported as materially modified with an October mod date.

The largest loan, Cerritos Corporate Center in MLCFC 2007-5, has an outstanding

balance of $37.5 million.

25 October 2012


Exhibit 39: List of liquidated loans in October 2012

Deal Loan Prop type Vintage CMBX

Bal at cutoff ($mn)

Bal at liq

($mn)

Loss severity

% bal at cutoff % bal at liq

BACM 2003-1 ADP Building Office 2003 6.5 4.0 28.4 46.6

BACM 2005-1 Terminal Tower Office 2005 38.0 34.8 26.5 28.9

BACM 2005-2 Silver Star Self Storage Self Storage 2005 2.1 1.8 0.0 0.0

BACM 2005-3 One Hanover Park Office 2005 22.8 20.7 29.2 32.3

BACM 2005-4 The Crossings Multifamily 2005 1 44.8 43.5 1.2 1.3

BACM 2006-1 Whitewater Trade Center Retail 2006 6.4 5.4 75.4 88.1

Linens N Things Retail 2006 3.8 3.5 94.9 103.5

Beltway 8 Office 2006 11.8 11.2 0.0 0.0

Bass Creek Corporate Center Office 2006 13.6 12.9 48.3 50.8

BACM 2007-2 Best Western Bradbury Suites-Pooler Lodging 2007 4 5.8 5.3 78.5 86.1

BACM 2007-3 Market at Morse Retail 2007 4 7.9 7.9 1.0 1.0

BACM 2007-5 Airpark - North 77th Street Industrial 2007 5 1.8 1.7 40.8 43.5

BSCMS 2000-WF1 Northwest Executive Center Office 2000 3.5 3.0 74.0 86.2

BSCMS 2002-PBW1 Stratford Arms Apartments Multifamily 2002 3.4 3.0 28.6 33.0

Woods at Southlake Multifamily 2002 3.9 3.4 36.9 42.6

BSCMS 2003-T12 Paradise Crossing Shopping Center Retail 2003 5.4 4.8 0.0 0.0

BSCMS 2006-PW13 Agua Caliente Retail 2006 2 8.6 8.3 44.1 45.8

BSCMS 2006-PW14 Plantation Pointe Retail 2006 3 6.9 6.7 46.1 47.7

BSCMS 2006-T22 Stor Stuff Lancaster Self Storage 2006 3.1 2.8 24.8 27.5

BSCMS 2007-PW18 Ashley Furniture Fairfield CA Retail 2007 5 10.2 9.9 54.7 56.4

Wingate Inn - Best Western Lodging 2007 5 7.9 6.9 48.3 55.4

CD 2006-CD3 Bare Cove Office Park Office 2006 10.9 10.3 58.8 62.0

COMM 2006-C8 Garden Grove Shopping Center Retail 2006 3 7.9 7.9 1.1 1.1

CSFB 2001-CF2 207 & 209-11 Washington Street Mixed Use 2001 0.5 0.4 0.0 0.0

CSFB 2001-CK3 Pond View Mobile Home Park Mobile Home Park 2001 1.2 1.0 49.3 56.9

CSFB 2002-CKN2 45 Wintonbury Avenue Office 2002 0.8 0.7 36.8 42.2

PNC Center Office 2002 44.4 38.9 22.1 25.3

The Falls at Tampa Bay Apartments Multifamily 2002 7.4 6.4 0.0 0.0

CSFB 2002-CKS4 Pebble Springs Plaza Retail 2002 1.8 1.6 1.0 1.1

Tuckaway Manor Mobile Home Park Multifamily 2002 1.1 1.0 0.9 1.0

SummitWoods Crossing Retail 2002 48.0 41.9 0.9 1.0

InSite Forsyth Retail 2002 1.0 0.9 0.9 1.0

CSFB 2002-CP3 Mission Trails Manufactured Housing Community Mobile Home Park 2002 2.0 1.7 4.6 5.2

CSFB 2002-CP5 Carriage Village Mobile Home Park Mobile Home Park 2002 3.7 3.0 0.8 1.0

CSFB 2003-C4 Chatsworth Industrial Industrial 2003 7.6 6.7 0.9 1.0

CSFB 2003-C5 Huntley Road Retail Center Retail 2003 1.9 1.6 45.3 52.2

CSFB 2004-C3 Shamrock Mobile Home Park Multifamily 2004 1.0 0.9 21.5 24.0

Crooked Creek Centre Retail 2004 3.4 2.9 89.1 104.6

CSFB 2005-C1 Bank One Buildings Office 2005 9.1 8.1 40.7 46.0

BP Berkshire Hills Apartments Multifamily 2005 7.9 7.2 1.0 1.1

CSFB 2005-C5 Wall St Plaza Office 2005 1 9.5 8.4 55.6 62.4

CSFB 2005-C6 Sterling Pointe Apartments Multifamily 2005 1 3.7 3.7 50.6 50.6

CSMC 2006-C1 Craig Road Retail Retail 2006 3.0 2.7 50.7 56.5

CSMC 2006-C2 St. Andrews Place Retail 2006 3.2 3.0 43.1 46.7

CSMC 2006-C3 The Lakes Apartments Multifamily 2006 2 4.6 4.1 59.5 66.4

3030 Matlock Office Center Office 2006 2 8.2 7.6 23.3 24.9

CSMC 2007-C1 Wake Forest Eatery Retail 2007 3 2.8 2.6 55.1 59.6

Carrollwood Oaks SC Retail 2007 3 4.6 4.5 43.7 44.6

CSMC 2007-C2 Valle Verde Pads #2 and #3 Retail 2007 3.0 2.9 51.4 53.0

CSMC 2007-C3 Westwood Complex Mixed Use 2007 4 47.5 47.5 2.1 2.1

25 October 2012




Bal at cutoff ($mn)

Bal at liq

($mn)

Loss severity


AG Edwards Building Office 2007 4 1.0 1.0 37.2 37.3

CSMC 2007-C4 4355 Montgomery Road Office 2007 4&5 4.1 3.9 0.0 0.0

CSMC 2008-C1 Embassy Suites Lodging 2008 5 9.1 8.6 32.3 34.0

Park Place at Heathrow Mixed Use 2008 5 11.6 11.0 47.3 50.0

CWCI 2007-C3 Channel Pointe Plaza Retail 2007 4 9.7 9.5 69.4 71.2

DLJCM 1998-CF1 Dietrich Meadows S/C Retail 1998 8.4 6.7 36.6 45.9

FUBOA 2001-C1 Franklin Centre Shopping Center Retail 2001 2.2 1.9 10.2 11.7

1545 26th Street Office Building Office 2001 4.1 3.5 1.2 1.3

GCCFC 2002-C1 Cape Coral Town Center Retail 2002 3.0 2.4 0.8 1.1

GCCFC 2005-GG3 Quail Corners South Office 2005 4.6 4.1 53.4 59.9

GCCFC 2007-GG11 Conifer Town Center Retail 2007 5 22.4 19.5 37.5 42.8

GECMC 2002-1A Brandon Mills Apartments Multifamily 2002 6.4 5.6 0.0 0.0

GECMC 2007-C1 Hampton Inn West Lodging 2007 7.9 7.3 0.0 0.0

GMACC 1999-C3 Lakeside Place Office Building Office 1999 7.4 6.4 57.0 66.1

GMACC 2001-C1 2755 Carpenter Road Office 2001 2.3 2.0 1.2 1.4

GMACC 2002-C2 Wyndfall Apartments Multifamily 2002 2.6 2.3 0.0 0.0

GMACC 2002-C3 Main Place Office 2002 8.0 7.0 1.3 1.4

GSMS 2006-GG6 100 East Walton Street Garage Other 2006 3.8 3.7 96.2 98.2

Gateway 801 Office 2006 35.0 34.3 5.8 5.9

2 East Oak Street Other 2006 5.9 5.8 86.7 87.9

JPMC 1997-C5 Days Inn - Orangeburg Lodging 1997 1.8 1.0 1.3 2.5

JPMCC 2002-C1 Village of Red Hill Mobile Home Park 2002 1.6 1.4 1.0 1.1

JPMCC 2002-C2 Andover Club Apartments Multifamily 2002 6.1 5.3 2.3 2.7

Twin Pines MHP Mobile Home Park 2002 1.6 1.3 58.5 72.9

JPMCC 2002-C3 Bayou Plaza Retail 2002 4.3 3.4 0.8 1.0

JPMCC 2004-C3 4 Commercial Street Industrial 2004 5.2 4.3 75.3 91.7

JPMCC 2004-CB9 The Shops at Copper Crossing Retail 2004 3.0 2.7 63.6 71.0

JPMCC 2005-CB11 Ruisseau Village Retail 2005 8.5 7.5 61.7 69.9

JPMCC 2006-CB14 Pheasant Run Multifamily 2006 11.0 9.9 29.4 32.4

JPMCC 2006-CB15 Comfort Inn Airport Lodging 2006 2 2.5 2.2 57.7 66.3

Lightstone Portfolio Retail 2006 2 73.9 62.5 76.7 90.8

JPMCC 2006-CB16 City View Portfolio 1 Multifamily 2006 2 72.8 69.0 95.6 100.8

JPMCC 2006-LDP6 Approved Mortgage Building Office 2006 7.4 7.1 69.4 72.9

JPMCC 2006-LDP7 Powers Ferry Landing East Office 2006 2 50.0 48.3 71.9 74.4

Embassy Suites - Beachwood Lodging 2006 2 15.5 13.8 37.2 41.7

JPMCC 2007-C1 Hampton Inn - Cumming, GA Lodging 2007 5 5.8 5.4 62.6 67.9

JPMCC 2007-CB19 Hampton Inn Dry Ridge Lodging 2007 4 3.0 2.8 62.9 67.2

Holiday Inn Express - Jackson, MS Lodging 2007 4 6.1 5.7 91.5 97.2

Bronx Apartment Portfolio Multifamily 2007 4 36.5 36.5 39.4 39.4

JPMCC 2007-LD11 Six Forks - Raleigh Office 2007 4 2.7 2.6 76.3 78.1

JPMCC 2007-LD12 Comfort Inn - San Diego Zoo Lodging 2007 4&5 33.5 32.8 63.4 64.8

JPMCC 2007-LDPX Sawyer Portfolio Multifamily 2007 3 43.0 43.0 72.7 72.7

LBCMT 2007-C3 35, 45, & 55 Morrissey Boulevard Mixed Use 2007 4 24.0 23.5 1.0 1.0

LBUBS 2004-C6 Delray Corporate Center Office 2004 13.2 11.3 1.2 1.4

LBUBS 2006-C4 Smith Portfolio - B - Burlington I Multifamily 2006 2 3.5 3.3 91.1 96.3

Smith Portfolio - B - Mocksville Multifamily 2006 2 3.1 2.9 92.2 98.1

LBUBS 2006-C7 Silver Lake Plaza Retail 2006 3 2.0 1.9 57.6 58.2

North Meadows Retail 2006 3 3.1 3.0 43.7 45.9

Gaffney Portfolio Multifamily 2006 3 5.3 4.9 62.9 68.1

LBUBS 2007-C1 Towers at Park Central Office 2007 3 64.0 64.0 1.0 1.0

25 October 2012




Bal at cutoff ($mn)

Bal at liq

($mn)

Loss severity


LBUBS 2007-C7 Crossroads Shopping Center Retail 2007 5 1.5 1.4 64.3 67.9

MLCFC 2006-2 Forum Shops Retail 2006 2 3.0 2.8 48.9 53.3

MLCFC 2006-4 Lythgoe MFH Portfolio Multifamily 2006 3 12.7 9.5 0.0 0.0

MLMT 2005-CKI1 120 Bloomingdale Office 2005 1 19.5 17.9 71.1 77.6

Anthem Shopping Center Retail 2005 1 10.8 6.4 46.8 78.6

Fountain Square Retail 2005 1 23.4 22.8 44.5 45.6

MLMT 2005-MKB2 Digeo Office Building Office 2005 10.2 9.8 16.3 17.0

MLMT 2006-C1 3800 Prince Street SE Building Industrial 2006 2.5 2.3 22.0 24.1

Pecan Grove Office 2006 1.5 1.3 61.2 70.6

MLMT 2006-C2 Redwood Square Retail 2006 2 5.4 5.2 60.3 62.6

MLMT 2007-C1 Crowne Plaza Hotel - Mundelein Lodging 2007 4 12.0 11.0 1.0 1.1

MSC 2003-IQ4 Toringdon One Office 2003 10.6 8.5 0.5 0.7

MSC 2004-T15 Interstate Business Park Industrial 2004 2.7 2.0 0.0 0.0

MSC 2005-HQ7 All Seasons Portfolio Roll-up Self Storage 2005 1 3.6 3.2 38.0 42.6

MSC 2005-IQ10 Barrett Office Center I & II Office 2005 1 7.6 7.0 48.2 52.1

MSC 2006-HQ10 Brookshire Suites Hotel Lodging 2006 3 7.6 7.1 24.1 25.9

MSC 2006-HQ8 Washington Park - Circuit City Retail 2006 5.0 4.6 61.0 65.8

MSC 2006-HQ9 140 Diamond Creek Place Office 2006 2 3.4 3.1 69.4 75.0

MSC 2006-T23 2905 and 2931 Cobb Parkway Retail 2006 2 5.0 4.6 0.6 0.6

MSC 2007-IQ14 Everett Mall Steadfast Retail 2007 4 98.0 98.0 50.1 50.1

Circle K- 1985 West Market, Akron- Mazeltov Retail 2007 4 1.2 1.1 0.3 0.3

MSC 2007-IQ16 Town Square at Canton Retail 2007 5 3.6 3.4 58.1 61.9

MSC 2007-T25 Food 4 Less Center Shops Retail 2007 3 5.0 4.8 85.1 88.2

MSC 2007-T27 JC Penney-Ground Lease Other 2007 4 3.6 3.6 70.4 70.4

550 Western Office 2007 4 5.3 5.0 0.0 0.0

MSDWC 2001-TOP3 Lear Corporation Facility-Auburn Hills Plant Industrial 2001 7.5 6.1 70.7 87.4

PNCMA 2001-C1 Country Squire Apartments Multifamily 2001 3.7 2.9 10.4 13.6

Kingsborough Townhomes Multifamily 2001 3.4 2.6 15.7 20.6

SBM7 2002-KEY2 202 Tillary Street Self Storage 2002 6.0 4.8 0.0 0.0

WBCMT 2002-C1 Gateway Courtyard Retail 2002 6.6 5.8 0.9 1.1

WBCMT 2004-C11 Essex Place Apartments Multifamily 2004 20.4 18.3 0.0 0.0

WBCMT 2004-C12 Great American Plaza Building A Office 2004 4.2 3.6 22.6 26.3

Mountain View Apartments Multifamily 2004 11.0 9.8 18.2 20.3

WBCMT 2005-C19 Walgreens - Livonia, MI Retail 2005 4.1 4.1 0.0 0.0

WBCMT 2005-C20 Riverdale Strip Center Retail 2005 2.4 2.1 64.4 72.0

WBCMT 2006-C28 Hampton Inn and Suites - Port Saint Lucie, FL Lodging 2006 8.0 7.2 63.8 71.3

WBCMT 2006-C29 Abbotts Bridge Office Office 2006 3 5.7 5.6 43.7 44.2

WBCMT 2007-C31 Sherwood Plaza Office 2007 4 15.7 15.7 100.0 100.0


25 October 2012


Technical update

Exhibit 40: US CMBS pipeline

Deal type Rate type Size ($ million)

Deals in October 2012

Deutsche Bank, Cantor Fitzgerald - COMM 2012-CR4 (Deal is in the market) Conduit/Fusion Fixed 1,111

Fashion Show Mall - BBUBS 2012-SHOW (Deal is in the market) Single Borrower Fixed 835

Vornado Realty (666 Fifth Avenue retail condo) Single Borrower Fixed 390

General Growth (Bridgewater Commons mall) Single Borrower Fixed 300

NorthStar (Floater) - NRF 2012-1 (Deal is in the market) Floater Floating 228

November 2012

Goldman, Citigroup, Jefferies LoanCore, Archetype Conduit/Fusion Fixed 1,400

Blackstone (Motel 6) Single Borrower Fixed 1,000

JPMorgan Conduit/Fusion Fixed 1,000

Vornado, Trump (1290 Avenue of the Americas) Single Borrower Fixed 940

Whitehall, Chartres Lodging (hotel portfolio) Single Borrower Floating 300

December 2012

Extended Stay Hotels (hotel portfolio) Single Borrower Fixed 2,500

UBS, Barclays, Natixis, RAIT, GE Capital Conduit/Fusion Fixed 1,250

Square Mile Capital (Distressed loans) Other Fixed 200

Announced Total 10,837

Source: Credit Suisse, Commercial Mortgage Alert

Exhibit 41: 2012 CMBS issuance in millions

Month

Multi-

Borrower

Floating

Rate

Single

Borrower Other

2012 US

Total

2012 Non-US

Total*

2012 Global

Total

US Agency

CMBS**

US Resecur. /

CDO

January $1,154 $0 $0 $0 $1,154 $701 $1,856 $4,113 $0

February $0 $0 $625 $0 $625 $334 $959 $6,111 $0

March $2,965 $0 $450 $0 $3,415 $0 $3,415 $4,099 $0

April $2,465 $0 $412 $225 $3,102 $826 $3,929 $5,061 $0

May $2,556 $0 $1,670 $160 $4,386 $0 $4,386 $5,488 $70

June $3,608 $0 $415 $0 $4,023 $362 $4,385 $3,722 $0

July $2,654 $0 $925 $255 $3,834 $0 $3,834 $5,574 $0

August $1,321 $466 $340 $230 $2,357 $0 $2,357 $3,816 $336

September $4,536 $0 $1,000 $195 $5,731 $2,154 $7,884 $8,150 $1,367

October $3,428 $273 $0 $0 $3,701 $0 $3,701 $6,693 $0

Total $24,687 $739 $5,837 $1,064 $32,327 $4,377 $36,704 $52,827 $1,773

*Does not include international deals created for central-bank exchanges. ** Includes both pass through and REMIC Agency CMBS transactions (Tickers: GNR, FREMF, FNA, GEMS, MFMEG, SBAP and SBIC) Source: Credit Suisse, Commercial Mortgage Alert, IFR

25 October 2012


Relative Value Monitor

Exhibit 42: 10-year sector – CMBS, REIT, and corporate spreads

0

50

100

150

200

250

300

Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12

Sp

rea

ds to

US

T

CMBS AAA

REIT BBB Index

Corporate A

Source: Credit Suisse

Exhibit 43: 5-year sector Exhibit 44: 10-year sector

Δ bps 3-month

10/23/12 10/16/12 High Low Average

UST Yield 0.76 +7 0.82 0.55 0.68

Swap 12 +0 23 11 17

AAA CMBS 212 +0 283 211 248

Agency 16 +1 28 15 19

LUCI Single-A 62 -3 117 58 89

Δ bps 3-month

10/23/12 10/16/12 High Low Average

UST Yield 1.76 4.00 1.87 1.41 1.67

Swap 5 1 16 1 9

AAA CMBS 97 -2 184 95 135

FNMA DUS 53 1 84 51 67

Agency 7 0 22 7 13

LUCI Single-A 102 2 161 96 132

Note: Liquid U.S. Corporate Index is an investment-grade, corporate bond index consisting of ~800 liquid, US dollar-denominated issues, priced daily and rebalanced monthly by Credit Suisse. Source: Credit Suisse

Note: Liquid U.S. Corporate Index is an investment-grade, corporate bond index consisting of ~800 liquid, US dollar-denominated issues, priced daily and rebalanced monthly by Credit Suisse. Source: Credit Suisse

25 October 2012


Exhibit 45: CMBX prices as at October 23, 2012

CMBX 5 (CMBX 2008-1) AAA AM AJ AA A BBB BBB- BB

Current Price 94.65 83.32 64.89 45.59 26.96 17.83 13.90 5.00

Change vs. Prior Week -0.31 -0.72 -1.03 -0.72 -0.08 -0.13 -0.15 0.00

Minimum (18 mo.) 85.52 68.61 51.61 35.59 26.39 16.93 13.32 5.00

Maximum (18 mo.) 96.02 91.26 84.40 71.29 57.75 27.18 20.90 5.04

Average (18 mo.) 91.96 79.85 63.73 47.12 33.60 19.29 15.18 5.00

Standard Deviation 2.42 4.72 7.04 7.67 8.21 2.68 2.05 0.00

# of Std. Dev. 1.11 0.74 0.16 -0.20 -0.81 -0.54 -0.63 -0.06


Current Price 93.66 84.59 64.39 37.36 23.68 17.31 13.93 5.00


Minimum (18 mo.) 85.05 65.71 46.66 30.89 23.46 16.88 13.43 4.99

Maximum (18 mo.) 96.13 90.88 80.96 66.48 50.04 26.99 20.91 5.02

Average (18 mo.) 91.42 79.06 61.44 40.82 30.23 19.14 15.22 5.00


# of Std. Dev. 0.90 1.07 0.41 -0.44 -0.96 -0.67 -0.63 -0.02


Current Price 93.91 86.20 66.23 32.95 19.72 8.95 7.44 4.96

Change vs. Prior Week -0.52 -0.84 -1.19 -1.34 -0.61 -0.08 -0.16 -0.04

Minimum (18 mo.) 85.30 70.77 51.39 29.85 18.57 8.95 7.44 4.93

Maximum (18 mo.) 96.05 92.38 87.29 66.42 48.54 20.39 17.14 5.00

Average (18 mo.) 91.83 81.95 65.15 39.61 26.82 11.62 9.93 4.99


# of Std. Dev. 0.89 0.97 0.14 -0.80 -0.99 -0.95 -0.96 -1.78


Current Price 95.93 91.41 79.16 57.74 37.20 14.33 10.11 5.00


Minimum (18 mo.) 88.96 75.25 63.42 45.71 36.11 13.79 9.86 5.00

Maximum (18 mo.) 97.11 94.03 91.32 80.45 68.81 31.39 20.75 5.04

Average (18 mo.) 94.05 86.30 76.60 58.72 43.85 16.85 12.00 5.00


# of Std. Dev. 1.11 1.29 0.47 -0.14 -0.88 -0.62 -0.75 -0.09

CMBX 1 (CMBX 2006-1) AAA AM AJ AA A BBB BBB-

Current Price 97.49 94.56 88.56 73.37 57.25 32.82 17.17

Change vs. Prior Week -0.23 -0.58 -0.16 -0.51 -1.11 -0.28 -0.30

Minimum (18 mo.) 92.09 82.48 73.25 58.63 46.66 25.07 13.36

Maximum (18 mo.) 98.11 96.17 92.60 87.23 80.42 54.05 32.11

Average (18 mo.) 95.81 90.71 84.33 71.13 58.88 34.56 18.85

Standard Deviation 1.26 3.01 4.09 5.67 6.81 5.78 4.03

# of Std. Dev. 1.33 1.28 1.03 0.40 -0.24 -0.30 -0.42

Source: Credit Suisse, Markit

25 October 2012


Exhibit 46: CMBS historical spreads

CMBS Spreads - Change on the Year

SPREAD TO SWAPS 5AAA 10AAA 10AA 10A 10BBB 10BBB-

10/23/2012 200 92 na na na na

12/30/2011 310 250 2795 3030 na na

Change (110) (158) na na na na

SPREAD TO UST 5AAA 10AAA 10AA 10A 10BBB 10BBB-

10/23/2012 212 97 na na na na

12/30/2011 350 267 2812 3047 na na

Change (138) (170) na na na na

SWAP SPREADS 5y r Sw ap 10y r Sw ap

10/23/2012 12 5

12/30/2011 40 17

Change (28) (12)

CMBS Spread to Swaps History

5AAA 10AAA 10AA 10A 10BBB 10BBB-

YTD Average 262 182 2561 2997 na na

Range 200 - 310 92 - 245 2330 - 2755 2670 - 3315 na na

2011 Average 299 268 2052 3087 na na

Range 225-350 155-355 1260-2790 2145-4180 na na

2010 Average 274 302 3341 4380 na na

Range 235-310 215-415 2710-3500 3450-4900 na na

2009 Average 736 634 4029 5729 na na

Range 350-1450 300-1200 3000-5500 3900-8100 na na

2008 Average 466 365 1362 1807 2747 3202

Range 125-1500 82-1400 275-5500 400-6500 825-9000 950-9700

2007 Average 49 44 101 142 315 386

Range 16-125 21-105 33-260 42-380 65-900 85-1000

2006 Average 17 26 38 47 87 122

Range 14 - 22 22 - 32 32 - 51 40 - 61 75 - 120 85 - 175

2005 Average 19 28 41 51 103 151

Range 16 - 25 22 - 34 28 - 49 36 - 59 80 - 122 125 - 175

2004 Average 28 30 37 45 84 126

Range 24 - 33 26 - 35 32 - 43 40 - 54 75 - 95 115 - 135

2003 Average 36 37 47 56 111 162

Range 28 - 45 29 - 47 36 - 61 44 - 77 85 - 140 130 - 185

2002 Average 44 47 59 73 121 155

Range 38 - 51 42 - 54 52 - 74 62 - 95 105 - 150 135 - 186

2001 Average 46 52 69 87 141 185

Range 35 - 60 45 - 64 59 - 84 74 - 105 125 - 170 164 - 215

2000 Average 25 36 53 70 119 165

Range 22 - 35 31 - 45 47 - 63 62 - 84 102 - 143 138 - 217

1999 Average 35 42 61 82 144 232

Range 19 - 51 35 - 54 51 - 79 66 - 109 105 - 199 185 - 298

1998 Average 32 41 57 77 125 174

Range 11-95 21-105 35-125 50-160 82-245 106-321 Source: Credit Suisse

25 October 2012


Recent publications The table below provides a link to some of our recent CMBS publications.

Date published Loans in the News

Oct-19 One & Two Prudential head to special servicing (JPMCC 2006-CB16, JPMCC 2006-LDP7)

Stake in 1440 Broadway to trade (GCCFC 2005-GG3)

240 West 40th Street for sale (WBCMT 2005-C19)

Oct-18 Stuy Town tenants unhappy with CWCapital (various)

Noteworthy losses hit MSC 2007-IQ14

o Everett Mall Steadfast liquidates with a 50% loss

o New York City Apartment Portfolio deemed non-recoverable

Colony VI portfolio loans modified (JPMCC 2007-LDPX)

One Westchase Center bid well above trust exposure (GCCFC 2007-GG9)

Oct-15 Moody’s/RCA CRE index near flat in Aug

Parmatown Shopping Center to be sold and liquidated; high loss seems likely (GMACC 2004-C2)

Two loans liquidated with large losses

o Lightstone Portfolio (JPMCC 2006-CB15)

o City View Portfolio 1 (JPMCC 2006-CB16)

Oct-10 Equity One buying several CMBS-related properties (CSMC 2007-C3, GECMC 2005-C2, BACM 2006-4)

o Westwood Complex

o Darinor Plaza

o 250 East 65th Street

H&M takes over former ESPN Zone space at 4 Times Sq (FTST 2006-4TS, LBUBS 2007-C1)

1101 New York negotiating for part of Dewey’s old space (BSCMS 2007-PW17, MLMT 2007-C1)

1700 Broadway poised to payoff (MLMI 1998-C3)

801 Gateway trades out of REO at a small loss (GSMS 2006-GG6)

Small revision in Beacon Seattle & DC mod template (various)

https://plus.credit-suisse.com/u/FuDwYa

https://doc.research-and-analytics.csfb.com/docView?language=ENG&format=PDF&document_id=1001665251&source_id=emrna&serialid=AltD1xURv8dUVpWRNRghlAM6zHSyc%2fw6GElwJexjZw8%3d

https://plus.credit-suisse.com/u/EEQ1LR

https://plus.credit-suisse.com/u/DSG0FN

GLOBAL SECURITIZED PRODUCTS RESEARCH

Roger Lehman, Managing Director

Global Head of Securitized Products Research

+1 212 325 2123

[email protected]

Eric Miller, Managing Director

Global Head of Fixed Income and Economic Research

+1 212 538 6480

[email protected]

RESIDENTIAL MORTGAGES CONSUMER ABS

Mahesh Swaminathan, Managing Director Chandrajit Bhattacharya, Director

Group Head Group Head

+1 212 325 8789 +1 212 325 1546

[email protected] [email protected]

AGENCY MBS NON-AGENCY MBS Marc Firestein, Analyst

Mahesh Swaminathan, Managing Director Chandrajit Bhattacharya, Director +1 212 325 4379

Group Head Group Head [email protected]

+1 212 325 8789 +1 212 325 1546

[email protected] [email protected] CDO / CLO

Qumber Hassan, Director Marc Firestein, Analyst David Yan, Director

+1 212 538 4988 +1 212 325 4379 Senior Strategist

[email protected] [email protected] +1 212 325 5792

[email protected]

Vikram Rao, Vice President

+1 212 325 0709

[email protected]

CMBS

Roger Lehman, Managing Director Serif Ustun, Vice President, CFA Sylvain Jousseaume, Vice President Tee Chew, Associate

Group Head +1 212 538 4582 +1 212 325 1356 +1 212 325 8703

+1 212 325 2123 [email protected] [email protected] [email protected]

[email protected]

MODELING AND ANALYTICS

David Zhang, Managing Director

Group Head

+1 212 325 2783

[email protected]

Taek Choi, Vice President

+1 212 538 0525

[email protected]

Oleg Koriachkin, Vice President

+1 212 325 0578

[email protected]

Tony Tang, Vice President

+1 212 325 2804

[email protected]

Yihai Yu, Vice President

+1 212 325 1143

[email protected]

Joy Zhang, Vice President

+1 212 325 5702

[email protected]

Jack Yu, Vice President

+1 212 538 5597

[email protected]

LOCUS ANALYTICS

Brian Bailey, Director

Locus Analytics Specialist

+1 212 325 0182

[email protected]

Shana Bornstein, Associate

Locus Analytics Specialist

+1 212 325 1083

[email protected]

LONDON JAPAN

Carlos Diaz, Vice President

+ 44 20 7888 2414

[email protected]

Tomohiro Miyasaka, Director

Japan Head

+ 81 3 4550 7171

[email protected]

Disclosure Appendix

Analyst Certification Roger Lehman, Serif Ustun, Sylvain Jousseaume and Tee Chew each certify, with respect to the companies or securities that he or she analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

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Emerging Markets Bond Recommendation Definitions Buy: Indicates a recommended buy on our expectation that the issue will deliver a return higher than the risk-free rate. Sell: Indicates a recommended sell on our expectation that the issue will deliver a return lower than the risk-free rate.

Corporate Bond Fundamental Recommendation Definitions Buy: Indicates a recommended buy on our expectation that the issue will be a top performer in its sector. Outperform: Indicates an above-average total return performer within its sector. Bonds in this category have stable or improving credit profiles and are undervalued, or they may be weaker credits that, we believe, are cheap relative to the sector and are expected to outperform on a total-return basis. These bonds may possess price risk in a volatile environment. Market Perform: Indicates a bond that is expected to return average performance in its sector. Underperform: Indicates a below-average total-return performer within its sector. Bonds in this category have weak or worsening credit trends, or they may be stable credits that, we believe, are overvalued or rich relative to the sector. Sell: Indicates a recommended sell on the expectation that the issue will be among the poor performers in its sector. Restricted: In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Not Rated: Credit Suisse Global Credit Research or Global Leveraged Finance Research covers the issuer but currently does not offer an investment view on the subject issue. Not Covered: Neither Credit Suisse Global Credit Research nor Global Leveraged Finance Research covers the issuer or offers an investment view on the issuer or any securities related to it. Any communication from Research on securities or companies that Credit Suisse does not cover is factual or a reasonable, non-material deduction based on an analysis of publicly available information.

Corporate Bond Risk Category Definitions In addition to the recommendation, each issue may have a risk category indicating that it is an appropriate holding for an "average" high yield investor, designated as Market, or that it has a higher or lower risk profile, designated as Speculative and Conservative, respectively.

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