The latest read from Fitch indicates continued worsening, in November, across a range of commercial real estate types, with the worst pain being felt in office real estate.

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Fitch Ratings-NY-16 November 2009: Job losses and subsequent office loan

defaults, coupled with continued hotel underperformance, resulted in

another monthly increase in U.S. CMBS delinquencies, according to the

latest index results from Fitch Ratings.



U.S. CMBS late-pays rose again in October, up 28 basis points (bps) to

3.86%. The office sector had the highest increase in delinquencies since

September; with 19.4% additional delinquencies followed by hotels, with

a 16.5% increase.



Delinquency rates for all major property types are as follows:



--Office: 2.29%;

--Hotel: 6.81%;

--Retail: 3.55%;

--Multifamily: 6%;

--Industrial: 3.09%.



Office delinquencies increased $557.4 million in October 2009.

Contributing to the increase were three newly delinquent loans greater

than $50 million, the largest of which was 550 South Hope Street, a $165

million loan in GSMSC 2007-GG10. The loan transferred to the special

servicer in August 2009 after the borrower, Maguire Properties, stated

that it would no longer fund the debt service shortfalls. Cash flow from

the property has not increased to the banker’s underwritten expectations

at issuance as lease expirations are not yielding the higher assumed

rental rates.



‘Though longer leases on office properties have historically mitigated

sharp changes in performance, continued job losses are expected to

increase pressure on the office sector,’ said Managing Director and U.S.

CMBS group head, Susan Merrick. ‘With the looming possibility of leases

expiring on space under-utilized by companies that have downsized,

office performance may not reach a trough for a few years’.



However, it should be noted that even with the increase in October, the

office sector has the lowest delinquency rate currently at 2.29%.