Realpoint Cmbs Delinquency Report July 2009

August 2009

Monthly Delinquency Report - Commentary In July 2009, the delinquent unpaid balance for CMBS decreased for the first time since August 2008 after 10 straight monthly increases, down to only $25.68 billion from $28.65 billion a month prior. Delinquency in June 2009 had increased by a substantial $9.87 billion from May, up to a trailing 12-month high of $28.65 billion. The decline through July, however, came after nearly $4.8 billion of GGPsponsored loans were returned to current payment status following a 30-day delinquent status in June. While the ultimate resolution of these GGP-sponsored specially-serviced loans has yet to be determined, many were reported as current in July 2009 after multiple master servicers made modifications to their systems to account for the non-default rate interest-only payments being made on previously amortizing (principal and interest required) loans. On the other hand, not all master servicers are accounting for the GGP payments and cash-collateral order in the same fashion, and these loans remain on our Realpoint Watchlists for potential future delinquency and / or workout via liquidation. Table 1 - Trailing Three Months Delinquency Jul-09 Jun-09 May-09 UPB ($BB) UPB ($BB) UPB ($BB) Category $ 5.23 $ 11.24 $ 4.42 30-Day $ 3.97 $ 3.07 $ 3.50 60-Day 90+-Day $ 11.23 $ 9.57 $ 6.94 $ 3.05 $ 2.67 $ 2.24 Foreclosure $ 2.21 $ 2.10 $ 1.67 REO Current $ 793.49 $ 788.76 $ 806.58 Total CMBS $ 819.17 $ 817.41 $ 825.36 Total CMBS Del. $ 25.68 $ 28.65 $ 18.78 3.135%

Delinq. %

3.505%

2.275%

Despite the decline, the delinquent unpaid balance through July 2009 remains up an astounding 511% from one-year ago (when only $4.2 billion of delinquent balance was reported for July 2008), and is now almost 12 times the low point of $2.21 billion in March 2007. Outside of the 30-day delinquency decline, an increase in the remaining four delinquent loan categories was noted in July. More notably, the distressed 90+-day, Foreclosure and REO categories grew in aggregate for the 20th straight month – up by $2.15 billion (15%) from the previous month and over $13.63 billion (377%) in the past year.

The total unpaid balance for all CMBS pools under review by Realpoint was $819.2 billion in July 2009. Both the delinquent unpaid balance and delinquency percentage over the trailing twelve months are shown in Charts 1 and 2 below, clearly trending upward. Charts 1 and 2 – Monthly CMBS Delinquency: Balance vs. Percentage (source: Realpoint) $30.00

$28.65

$25.68 $25.00

$18.78

$20.00

$ (in billions)

$17.15

$13.89 $15.00 $11.99 $10.79 $8.68

$10.00 $7.03 $5.39 $5.00

$4.07

$4.64

$0.00 Aug-08

Sep-08

Oct-08

Nov-08

Dec-08

Jan-09 Feb-09 Month

Page 1 of 15

Mar-09

Apr-09

May-09

Jun-09

Jul-09

August 2009 4.000% 3.505% 3.500% 3.135%

3.000%

Percentage

2.500%

2.275% 2.066%

2.000% 1.664% 1.431% 1.500%

1.281% 1.025% 0.828%

1.000% 0.472%

0.543%

0.631%

0.500%

0.000% Aug-08

Sep-08

Oct-08

Nov-08

Dec-08

Jan-09 Feb-09 Month

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Note: Even if the $4.8 billion of GGP-sponsored loans that returned to current payment status in July were omitted from the reported delinquency stats in June (effectively ignored for delinquency reporting purposes), the monthly trend of growth for CMBS delinquency would have continued. Specifically, after removing these loans, CMBS delinquency still increased from $18.78 billion in May 2009 (2.275%) up to a hypothetical $23.85 billion in June 2009 (2.92%), and then to 25.68 billion in July (3.135%). The resultant delinquency ratio for July 2009 of 3.14% (down slightly from the 3.5% reported one month prior) is now over six times the 0.49% reported one-year prior in July 2008 and over 11 times the Realpoint recorded low point of 0.283% from June 2007. The increase in both delinquent unpaid balance and delinquency ratio over this time horizon reflects a steady increase from historic lows in mid-2007. An additional $152.4 million in loan workouts and liquidations were reported for July 2009 across 34 loans at an average loss severity of 31.3%. Fifteen of these loans, however, at $87.62 million experienced a loss severity near or below 1%, most likely related to workout fees, while the other 19 loans at $64.8 million experienced an average loss severity near 55%. As additional pressures are placed on special servicers to maximize returns in today’s credit market, true loss severities are expected to be high while liquidation activity is expected to slow as fewer transactions occur. This would be the result of reduced or distressed asset pricing, lower availability of take-out financing, and increased extensions of balloon defaults through 2009 and 2010. Forecasted Delinquency by Balance and Percentage – Scenario Analysis Overall, following the correction of the GGP-sponsored loans in July, we now expect the delinquent unpaid CMBS balance to continue along its current trend and grow towards $50 billion before the end of 2009. Based upon an updated trend analysis, we project the delinquency percentage to grow in excess of 6% before year-end 2009 (potentially approaching and surpassing 8% under more heavily stressed scenarios). This outlook is mostly due to the reporting of several large loans from recent vintage transactions that continue to show signs of stress and default, along with continued balloon maturity defaults from more seasoned vintage transactions. In addition, while we maintain our negative outlook for both the retail and hotel sectors for 2009, we are closely monitoring the negative trends surrounding several large struggling multifamily loans in the New York MSA that have near-term default risk, and the lack of new issuance to offset the continued increases in delinquent unpaid balance.

Page 2 of 15

August 2009 Our historical scenario and trend analysis regarding recent default activity and the potential for future delinquency growth (affected somewhat by the delinquency fluctuation of the previously mentioned GGPsponsored specially-serviced loans) presents the following: Scenario 1 (Six-Month Historical Assumptions): • • •

Over the past six months, delinquency growth by unpaid balance has averaged roughly $2.5 billion per month, while the outstanding universe of CMBS under review has decreased on average by $3.94 billion per month from pay-down and liquidation activity. If such delinquency average were increased by an additional 25% growth rate, and then carried through the end of 2009, the delinquent unpaid balance would reach $41 billion and reflect a delinquency percentage near 5.05% by December 2009. In addition to this growth scenario, if we add-in the potential default of two very large high risk CMBS loans under review by Realpoint (namely the $3 billion Peter Cooper Village / Stuyvesant Town loan spread through multiple CMBS deals via a pari passu structure, and the $4.1 billion Extended Stay Hotel loan in the WBC07ESH pool – which was recently transferred to the special servicer in July following the Chapter 11 bankruptcy protection filing of Extended Stay and the potential for CMBS debt restructuring), the delinquent unpaid balance would top $48 billion and reflect a delinquency percentage over 6% by December 2009.

Scenario 2 (Three-Month Historical Assumptions): • • •

Over the past three months, delinquency growth by unpaid balance has averaged roughly $2.85 billion per month, while the outstanding universe of CMBS under review has decreased on average by $3.7 billion per month from pay-down and liquidation activity. If such delinquency average were again increased by an additional 25% growth rate, and then carried through the end of 2009, the delinquent unpaid balance would reach $44 billion and reflect a delinquency percentage slightly above 5.3% by December 2009. In addition to this growth scenario, if we again add-in the potential default of the $3 billion Peter Cooper Village / Stuyvesant Town loan and the $4.1 billion Extended Stay Hotel loan, the delinquent unpaid balance would reach $51 billion and reflect a delinquency percentage above 6.3% by December 2009.

Special Servicing Exposure and Other Trends Special servicing exposure continues to rise dramatically on a monthly basis, having increased for the 15th straight month through July 2009. The unpaid balance for specially serviced CMBS increased on a net basis by $7.34 billion in July 2009, up to a trailing 12Table 2: Monthly Special Servicing Transfers month high of $47.87 billion from $40.53 billion in June and July 2009 only $37.05 billion in May. In addition, newly transferred Year Issued # of Loans Current Balance specially-serviced loans totaled 295 at $7.65 billion in July 2007 66 $ 4,627,226,962.92 2009, as shown in Table 2. Worth noting is that an 2006 50 $ 943,418,490.99 additional 159 loans at $6.396 billion of such balance (84% 2005 43 $ 825,828,288.59 of newly transferred balance) were issued from 2005 2004 34 $ 685,220,196.41 through 2007. Our default risk concerns for the 2005 to 2003 10 $ 59,890,210.70 2007 vintage transactions relative to underlying collateral 2002 3 $ 20,354,138.41 2001 9 $ 123,212,550.35 performance and payment ability are more evident on a 2000 12 $ 67,351,065.05 monthly basis. Both the volume and unpaid balance of 1999 60 $ 255,918,408.60 CMBS loans transferred to special servicing on a monthly 1998 5 $ 35,478,842.64 basis continues to raise questions about underlying credit 1997 3 $ 3,407,319.37 stability in today’s market climate for these more recent Totals 295 $ 7,647,306,474.03 vintage CMBS deals.

Page 3 of 15

August 2009 As a result of the recent transfer activity, the corresponding percentage of loans in special servicing increased to 5.84% of all CMBS by unpaid balance in July 2009, up from 4.96% a month prior. The overall trend of special servicing since January 2005, by both unpaid balance and percentage, is presented in Charts 3 and 4 below. Charts 3 and 4 – Special Servicing Exposure: Balance vs. Percentage (source: Realpoint) Special Servicing Exposure by Unpaid Balance ($BB): January 2005 through July 2009 $60.00

$50.00 Jul-09, $47.87

$40.00

$30.00

$20.00

Jan-09, $14.38 $10.00

Jan-05, $8.55

Jan-06, $5.57 Jan-08, $4.53

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Ap r-0 7

Jan-07, $3.74

Special Servcing Exposure as % of Outstanding CMBS: January 2005 through July 2009 7.00%

6.00% Jul-09, 5.84%

5.00%

4.00%

3.00%

2.00%

Jan-05, 1.95%

Jan-09, 1.71% Jan-06, 1.00%

1.00% Jan-07, 0.52% Jan-08, 0.52%

Page 4 of 15

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0.00%

August 2009 Furthermore, nearly 54% of delinquent unpaid balance through July 2009 came from transactions issued in 2006 and 2007, with over 28% of all delinquency found in 2006-issued transactions. When we extend our review to include the 2005 vintage, an additional 16% of total delinquency is found; thus over 70% of CMBS delinquency comes from 2005 to 2007 vintage transactions. Chart 5 below shows the increased delinquent unpaid balance relative to these three vintages over the past six months, clearly reflecting the increasing trends we have highlighted in recent months. Chart 5 – Monthly Delinquent Unpaid Balance for 2005, 2006 and 2007 Vintage Transactions $8,000,000,000

$7,000,000,000

$6,000,000,000

$5,000,000,000

$4,000,000,000

$3,000,000,000

$2,000,000,000

$1,000,000,000

$Feb-09

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Month

2005

2006

2007

Throughout 2009, we expect to see continued high delinquency by unpaid balance for these three vintages due to aggressive lending practices prevalent in such years. We also expect to see some loans from the 2008 vintage to show signs of distress and default in cases where pro-forma underwriting assumptions fail to be realized. Otherwise, when focusing on deals seasoned for at least one year, our investigation reveals the following: • Deals seasoned at least a year have a total unpaid balance of $815.9 billion, with $25.68 billion delinquent – a 3.15% rate (up from only 1.27% six months prior). • When agency CMBS deals are removed from the equation, deals seasoned at least a year have a total unpaid balance of $785.52 billion, with $25.602 billion delinquent – a 3.26% rate (up from only 1.32% six months prior). • Conduit and fusion deals seasoned at least a year have a total unpaid balance of $693.62 billion, with $24.26 billion delinquent – a 3.498% rate (up from only 1.38% six months prior).

Page 5 of 15

August 2009 Other concerns / dynamics within the CMBS deals we are monitoring which may affect the overall delinquency rate due to current credit market conditions in 2009 include: • • • • • • • • •

Growing balloon default risk from highly seasoned transactions for both performing and nonperforming loans coming due that are unable to payoff as scheduled, due mostly to a lack of refinance availability or further distressed collateral performance. Floating rate loan refinance and balloon default risk, as many large loans secured by un-stabilized or transitional properties reach their final maturity extensions, or fail to meet debt service or cash flow covenants necessary to exercise such extensions. Aggressive pro-forma underwriting on loans with debt service / interest reserve balances that are declining more rapidly than originally anticipated. Further stress on partial-term interest-only loans that begin to amortize during the year that already have in-place DSCRs hovering around breakeven. The unpaid balance related to loans underwritten with DSCRs between 1.10 and 1.25 as any decline in performance in today’s market could cause an inability to make debt service requirements. A decline in distressed asset sales or liquidations as traditional avenues for securing new financing is becoming less available. A negative / cautious outlook for the hotel sector as many sizeable hotel loans and portfolios from 2005-2008 vintage pools are reporting poor results in 2009. Continued weakening in retail performance as consumer spending is down and bankruptcy filings may grow further. Layoffs, bankrurptcies and downsizing have impacted office vacancies across most MSAs including historically strong markets like New York City, and this trend is expected to continue.

Monthly CMBS Loan Workouts and Liquidations The growing rate at which liquidated or resolved CMBS credits are replenished by newly delinquent loans remains a concern, especially regarding further growth in the Foreclosure and REO categories (evidence of additional loan workouts and liquidations on the horizon for 2009 and 2010). Since January 2005, over $8.09 billion in CMBS liquidations have been realized, while 47 of the last 53 months have reported average loss severities below 40%, including 21 below 30%. Annual liquidations for 2008 totaled $1.297 billion, at an overall average severity of only 24.9%. Such average was clearly brought downward by the number of loans that experienced a minor loss via workout fees and / or sales or refinance proceeds being near total exposure. Comparatively, liquidations in 2007 totaled $1.094 billion at an average severity of 32.8%. Liquidations in 2006 totaled $1.93 billion at an average severity of 30.2%, while 2005 had $3.097 billion in liquidations at an average severity of 34.2%. Therefore, to accurately account for such issues regarding loss severities for 2009, we have separated those loans with a loss severity near or below 1% for monthly snapshot reporting in table 3, as well as the property type severity figures presented in tables 5, 6 and 7 below.

Page 6 of 15

August 2009 Through July 2009, another $152.4 million in CMBS loan workouts and liquidations were reported at an overall average loss severity of 31.3% (shown in Table 3). We highlight, however, that 15 of these loans at $87.62 million experienced a loss severity near or below 1%, most likely related to special servicing workout fees, while the remaining 19 loans at $64.8 million experienced an average loss severity near 55% - a clearer reflection of true loss severity. We expect higher levels of loss severity to be the norm in 2009 for those loans that experience a term default where cash flow from operations is not sufficient to support in-place debt obligations (i.e. DSCR below break-even). Table 3 – Liquidations for July 2009: Material Loss vs. Workout Fees, etc. (source: Realpoint) Deal ID BACM0605 BOFC00C1 BSC07P17 CBAC0401 CBAC0401 CBAC0501 CBAC0501 CCSC00C2 CCSC00C2 CMAC98C2 CMAC98C2 CSF02CK1 CSF05C04 CSM08C01 FUBA01C1 FUNB02C1 GSM204G2 LBC99C01 MSDW00PR

Pros ID 69.000 8218094696-18 59.000 800000689 800000917 2005100625 2005100614 57 56 000WMFG172 000MLMI037 000050 117.000 56.000 000026 000086 000133 185 000065

Loan Name Woodside Center Blockbuster Strip Center PGA Professional Center 03FIXED/VARIABLE 05FIXED/VARIABLE 02FIXED/VARIABLE 02FIXED/VARIABLE Pike Plaza III Pike Plaza II Circuit City Houston Comp-USA Kimball Square Apartments Seven Oaks Apartments Peoria Strip Center Foxfire Apartments Western Heights 237 West Northfield Boulevard Linc oln Park Mobile Home Village Circuit City Stores

Prop Type Office Retail Office Multi-family Multi-family Multi-family Other Retail Retail Retail Retail Multi-family Multi-family Retail Multi-family Multi-family Office Multi-family Retail Sub-Totals

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

Balance Before Loss 8,150,000.00 636,778.55 12,387,102.67 121,605.40 352,412.55 262,443.85 174,672.07 1,194,577.91 8,700,725.58 2,515,256.98 1,751,735.71 4,257,529.28 2,411,545.62 1,652,950.62 12,261,172.81 1,896,283.52 2,387,698.99 839,609.38 2,849,793.82 64,803,895.31

Loss Amount $ 2,882,419.87 $ 32,135.48 $ 3,028,606.77 $ 121,605.40 $ 30,454.99 $ 262,443.85 $ 99,620.88 $ 1,194,577.91 $ 8,672,587.22 $ 2,025,960.13 $ 966,502.52 $ 2,205,663.89 $ 1,311,971.93 $ 1,028,478.25 $ 4,524,485.21 $ 1,896,283.52 $ 1,100,042.70 $ 112,841.04 $ 522,243.22 $ 32,018,924.78

Loss % 35.4% 5.0% 24.4% 100.0% 8.6% 100.0% 57.0% 100.0% 99.7% 80.5% 55.2% 51.8% 54.4% 62.2% 36.9% 100.0% 46.1% 13.4% 18.3% 55.2%

Loss Date City 7/16/2009 Alpharetta 7/20/2009 NORTH CANTON 7/30/2009 Palm Beach Gardens 7/27/2009 SCRANTON 7/15/2009 PHOENIX 7/3/2009 CENTRAL FALLS 7/1/2009 FALL RIVER 7/9/2009 INDIANAPOLIS 7/9/2009 INDIANAPOLIS 7/16/2009 HOUSTON 7/16/2009 WICHITA 7/17/2009 Dallas 7/31/2009 HENDERSON 7/10/2009 GLENDALE 7/31/2009 DURHAM 7/31/2009 DETROIT 7/1/2009 NULL 7/8/2009 LINCOLN PARK 7/10/2009 PORTLAND Avg Severity

State GA OH FL PA AZ RI MA IN IN TX KS TX KY AZ NC MI TN MI OR

Deal ID BACM0001 BACM0001 BSC99WF2 CSF99C01 DLJ99CG2 DLJ99CG2 DLJ99CG2 FUNB99C2 LBC99C01 LBUB04C1 LBUB05C1 MSDW01IQ MSDW01IQ MSDW01IQ PNC00C02

Pros ID 51513 51511 17154 99-04862 000152 000040 000039 000103 115 76 73 000100 000099 000001 000174

Loan Name Balcones Apartments Casa Verde Apartments 521-527 & 529-535 West 20th Street Mid-Towne Mobile Terrace Hampton Inn - Louisville Knollwood Estates Mobile Home Park (1F) River Haven Mobile Home Park (1F) Delmont Village Shopping Center 1200 Route 9 Kenneth Court Auburn Place & College Point I & II Apartments Fullerton Industrial Cerritos Industrial Town Center Plaza Briarwood Apartments

Prop Type Multi-family Multi-family Industrial Multi-family Hotel Multi-family Multi-family Retail Retail Multi-family Multi-family Industrial Industrial Retail Multi-family Sub-Totals

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

Balance Before Loss 1,239,067.35 2,292,430.34 5,686,272.07 1,904,682.98 2,794,288.11 2,431,262.18 8,752,100.35 3,146,069.57 2,653,494.76 2,655,449.53 2,820,026.83 2,263,559.94 2,358,758.10 45,701,561.41 919,767.75 87,618,791.27

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

Loss Amount 12,604.99 23,310.93 57,271.67 19,260.00 33,106.85 22,971.91 82,653.51 64,279.68 27,482.49 1,792.40 24,613.03 22,777.18 23,734.99 459,807.58 7,278.67 882,945.88

Loss % 1.0% 1.0% 1.0% 1.0% 1.2% 0.9% 0.9% 2.0% 1.0% 0.1% 0.9% 1.0% 1.0% 1.0% 0.8% 1.0%

Loss Date City 7/8/2009 COLLEGE STATION 7/8/2009 COLLEGE STATION 7/2/2009 New York 7/1/2009 SALINAS 7/1/2009 LOUISVILLE 7/2/2009 ALLENDALE 7/2/2009 GRAND HAVEN 7/1/2009 BATON ROUGE 7/1/2009 WOODBRIDGE 7/13/2009 TAMPA 7/13/2009 STEPHENVILLE 7/1/2009 FULLERTON 7/1/2009 Cerritos 7/7/2009 LEAWOOD 7/31/2009 Pueblo Avg Severity

State TX TX NY CA CO MI MI LA NJ FL TX CA CA KS CO

Aggregate Total $

152,422,686.58

Page 7 of 15

$ 32,901,870.66

31.3%

Avg Severity

August 2009 Table 4 – Monthly CMBS Liquidations and Average Loss Severity, January 2008 to July 2009 (source: Realpoint) Totals

Balance Before Loss

Loss Amount

Avg. Loss %

Jul-09

$

152,422,686.58

$

32,901,870.66

31.3%

Jun-09

$

104,612,935.29

$

27,604,887.58

39.6%

May-09

$

83,774,841.23

$

33,562,306.32

35.2%

Apr-09

$

65,890,685.28

$

13,820,841.89

31.1%

Mar-09

$

157,538,109.76

$

38,348,045.97

50.7%

Feb-09

$

53,881,344.45

$

21,297,774.64

23.6%

Jan-09

$

127,512,771.20

$

42,220,021.31

37.1%

Dec-08

$

119,798,193.52

$

53,191,551.67

42.0%

Nov-08

$

134,819,667.87

$

25,028,932.54

27.6%

Oct-08

$

93,685,039.57

$

8,286,575.46

13.5%

Sep-08

$

78,271,654.89

$

6,971,767.96

17.0%

Aug-08 Jul-08

$

70,664,692.73

$

12,174,288.96

20.0%

$

201,914,661.89

$

56,467,662.03

30.4%

Jun-08

$

158,520,022.07

$

31,146,059.73

24.9%

May-08

$

81,930,650.64

$

19,632,531.51

16.5%

Apr-08

$

115,172,947.71

$

62,227,934.35

29.4%

Mar-08

$

97,384,008.72

$

21,385,223.39

19.6%

Feb-08

$

86,972,409.26

$

19,949,191.89

20.3%

Jan-08

$

58,557,636.99

$

18,181,773.24

32.1%

Table 5 – Average Loss Severities by Property Type for 2009: All Liquidated Loans (source: Realpoint) Prop Type Healthcare Average Hotel Average Industrial Average Multi-family Average Office Average Other Average Retail Average Grand Average

$ $ $ $ $ $ $ $

Balance Before Loss 4,380,823.18 61,165,149.89 30,590,102.65 223,688,022.68 218,309,114.24 1,445,959.51 206,054,201.64 745,633,373.79

Loss Amount $ 2,055,986.84 $ 9,754,846.64 $ 6,858,983.98 $ 104,372,343.95 $ 36,346,072.99 $ 1,060,467.14 $ 49,307,046.83 $ 209,755,748.37

Loss % 46.9% 31.0% 16.9% 40.7% 23.8% 68.8% 32.6% 35.8%

# of Loans 1 6 8 83 26 7 47 178

Table 6 – Average Loss Severities by Property Type for 2009: Loans with Material Loss Severity Above 2% (source: Realpoint) Prop Type Healthcare Average Hotel Average Industrial Average Multi-family Average Office Average Other Average Retail Average Grand Average

$ $ $ $ $ $ $ $

Balance Before Loss 4,380,823.18 11,380,566.84 12,162,351.66 164,207,145.03 68,378,267.21 1,297,901.49 76,920,502.01 338,727,557.42

Loss Amount $ 2,055,986.84 $ 9,669,504.99 $ 6,671,344.27 $ 103,803,031.92 $ 35,163,713.03 $ 1,058,899.60 $ 48,019,077.67 $ 206,441,558.32

Loss % 46.9% 91.2% 64.6% 59.9% 55.0% 80.0% 56.0% 60.1%

# of Loans 1 2 2 56 11 6 27 105

Table 7 – Average Loss Severities by Property Type for 2009: Loans with Loss Severity Below 2%, including Assumed Special Servicing Workout Fees (source: Realpoint) Prop Type Hotel Average Industrial Average Multi-family Average Office Average Other Average Retail Average Grand Average

$ $ $ $ $ $ $

Balance Before Loss 49,784,583.05 18,427,750.99 59,480,877.65 149,930,847.03 148,058.02 129,133,699.63 406,905,816.37

Page 8 of 15

$ $ $ $ $ $ $

Loss Amount 85,341.65 187,639.71 569,312.03 1,182,359.96 1,567.54 1,287,969.16 3,314,190.05

Loss % 0.8% 1.0% 1.0% 0.9% 1.1% 1.1% 1.0%

# of Loans 4 6 27 15 1 20 73

August 2009 For comparison by property type: • The highest loss severities in 2006 were found in healthcare (55%) and industrial (34.5%) collateral; multifamily collateral remained highest by balance before liquidation ($606.7 million), but reported the lowest severity (24.5%). • The highest loss severities in 2007 were found in industrial (50%) and healthcare collateral (44%); multifamily collateral was again the highest by balance before liquidation ($356 million), but reported the fourth lowest severity (32.5%). • The highest loss severities in 2008 were found in mixed-use / other (36%) and multifamily collateral (31%); multifamily collateral was again the highest by balance before liquidation ($576.97 million). Future Workouts – Delinquency Categories The total balance of loans in Foreclosure and REO increased for the 21st straight month to $5.26 billion in July 2009 from $4.77 billion in June and only $3.91 billion in May, despite ongoing liquidation activity. The chart below also shows the rapid growth of loans reflecting 30-day delinquency in the past six months, transitioning swiftly into more distressed levels on a monthly basis in 2009, thus supporting our use of 30-day defaults as an early indicator of workouts to come for 2009-2010. Chart 6 – Monthly Delinquency Categories (source: Realpoint)

$12,000,000,000

$10,000,000,000

$ Delinq.

$8,000,000,000

$6,000,000,000

$4,000,000,000

$2,000,000,000

$-

Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Month

30-Day

60-Day

90+-Day

Page 9 of 15

Foreclosure

REO

August 2009 Property Type • In July 2009, retail loans remained the greatest contributor to overall CMBS delinquency, at 1.06% of the CMBS universe, over 33% of total delinquency, and a 3.8% delinquency rate. Retail surpassed multifamily in May 2009 as the highest CMBS default contributor, for the first time since May 2004. • Following a slight decline in May 2009 (the first decline since August 2008), multifamily loans remained a poor performer in June and July 2009, with a delinquency rate over 4%. By dollar amount, multifamily loan delinquency is now up by an astounding $5.95 billion since a low point of only $903.3 million in July 2007. • As shown in Chart 7 below, multifamily, retail, office and hotel collateral loan delinquency as a percentage of the CMBS universe have clearly trended upward since mid-2008. • Only nine healthcare loans at 0.019% of the CMBS universe were delinquent in July 2009, but such delinquent unpaid balance reflects nearly 7% all healthcare collateral in CMBS. • As a percentage of total unpaid balance, month-over-month delinquencies for only two of seven categories increased by double digits or more from June to July 2009 (hotel and industrial). • In 2009 we expect retail delinquency to continue its increase as consumer spending suffers from the overall weakness of the U.S. economy. We also anticipate store closings and retailer bankruptcies to continue throughout the year, along with the uncertainty regarding GGP bankruptcy loan defaults. • In addition, the hotel sector will likely experience a significant increase in delinquency as both business and leisure travel slows further, resulting in further declines in occupancy, REVPAR and ADR. Table 8 – Monthly Delinquency by Property Type (source: Realpoint) Prop.Type Healthcare Total Hotel Total Industrial Total Multi-family Total Office Total Retail Total Other Total Grand Total

Current Balance $ 152,717,601.12 $ 3,487,307,082.21 $ 868,274,196.85 $ 6,851,062,405.82 $ 4,203,041,121.62 $ 8,692,065,992.50 $ 1,427,808,214.78 $ 25,682,276,614.90

Loan Count 9 187 127 772 394 768 211 2,468

% of CMBS Universe 0.019% 0.426% 0.106% 0.836% 0.513% 1.061% 0.174% 3.135%

% of CMBS Delinq. 0.595% 13.579% 3.381% 26.676% 16.366% 33.845% 5.560% 100.000%

% of Property Type 6.985% 4.682% 2.413% 4.215% 1.832% 3.819% 1.642%

Chart 7 – Trailing Twelve Month Delinquency by Property Type (source: Realpoint) Property Type Monthly Delinquency: as Percentage of CMBS Universe

1.60% 1.40% Percentage

1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% Au

J M M A N J D S J F O g- 0 ep- 0 ct -0 ov-0 ec- 0 an-0 eb-0 ar -0 pr-0 ay-0 un-0 ul- 09 9 9 8 9 9 8 8 8 9 9 8

Month Healthcare

Hotel

Industrial

Multi-family

Office

Retail

Other

Table 9 – Trailing Twelve Month Delinquency by Property Type: as % of Outstanding Property Type Balance (source: Realpoint) Trailing Twelve Month Property Type Delinquency: as % of Outstanding Property Type Balance Property Type Healthcare Hotel Industrial Multi-family Office Retail Other

Aug-08 4.4% 0.3% 0.3% 1.1% 0.3% 0.3% 0.2%

Sep-08 4.2% 0.3% 0.4% 1.3% 0.3% 0.4% 0.3%

Oct-08 4.4% 0.5% 0.6% 1.4% 0.3% 0.6% 0.2%

Nov-08 5.0% 0.7% 0.6% 1.9% 0.4% 0.8% 0.3%

Dec-08 5.2% 1.1% 0.9% 2.0% 0.5% 1.1% 0.3%

Jan-09 5.9% 1.5% 1.0% 2.4% 0.7% 1.3% 0.5%

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Feb-09 5.8% 1.8% 1.1% 2.6% 0.8% 1.6% 0.4%

Mar-09 5.6% 2.0% 1.3% 2.8% 1.1% 1.8% 0.7%

Apr-09 6.0% 2.2% 1.5% 3.7% 1.2% 2.3% 0.9%

May-09 Jun-09 5.5% 6.3% 2.8% 4.2% 1.6% 1.9% 3.4% 4.0% 1.5% 1.8% 2.6% 5.2% 1.1% 2.6%

Jul-09 7.0% 4.7% 2.4% 4.2% 1.8% 3.8% 1.6%

August 2009 Special Servicing • Special servicing exposure increased for the 15th straight month to $47.87 billion in July 2009 from $40.53 billion in June and only $37.05 billion in May. • For the 20th straight month, the total unpaid principal balance for specially-serviced CMBS when compared to 12 months prior increased, by a high $41.4 billion since July 2008. Such exposure is up over 642% in the trailing-12 months. • Conversely, for historical reference, special servicing exposure was also below $4 billion for 11 straight months through October 2007. • With the May 2009 transfer of nearly $7.33 billion of GGP related SPE borrower loans to special servicing, exposure by property type is now heavily weighted towards retail collateral at 37%, followed by multifamily at 21% and other at 16%. • Unpaid principal balance noted as current but specially-serviced decreased to a low of $1.44 billion in July 2007, but has since increased to $25.3 billion in July 2009. This figure is inflated by the GGPsponsored loans paying interest-only at the non-default rate of interest (despite some requiring principal and interest from amortization prior to transfer in May). • Within the 3.08% of CMBS current but specially-serviced, we found 242 loans at $21.23 billion with an unpaid principal balance over $20 million, up from 176 loans at $12.1 billion a month prior. • Unpaid principal balance exceeded $50 million for 135 current but specially-serviced loans in July 2009, and exceeded $100 million for 75 loans. Such loans are now highlighted by the various Extended Stay Hotel loan notes found in the WBC07ESH transaction. Table 10 – Trailing Twelve Month Special Servicing Exposure (source: Realpoint) All Specially Serviced Month Jul-09 Jun-09 May-09 Apr-09 Mar-09 Feb-09 Jan-09 Dec-08 Nov-08 Oct-08 Sep-08 Aug-08 Jul-08

UPB*

Loans current but with

% of CMBS

$47.87 $40.53 $37.05 $24.52 $20.30 $17.11 $14.38 $12.78 $10.14 $8.32 $7.23 $6.88 $6.45 * Figures in billions

Delinquent and

the Special Servicer UPB % of CMBS

5.84% 4.96% 4.49% 2.95% 2.43% 2.04% 1.71% 1.51% 1.20% 0.97% 0.85% 0.80% 0.75%

$25.26 $15.76 $21.23 $10.35 $8.39 $7.14 $5.87 $5.77 $4.31 $3.97 $3.50 $3.50 $3.01

Specially Serviced UPB % of CMBS SS

3.08% 1.93% 2.57% 1.25% 1.01% 0.85% 0.70% 0.68% 0.51% 0.46% 0.41% 0.41% 0.35%

$22.61 $24.77 $15.82 $14.16 $11.91 $9.96 $8.51 $7.01 $5.83 $4.35 $3.73 $3.38 $3.44

Chart 8 – Special Servicing Exposure by Property Type (source: Realpoint)

Property Type Stratification - Specially Serviced Assets

Retail Total 36.9%

Healthcare Total Hotel Total 0.3% 9.8% Industrial Total 2.3% Multi-family Total 20.8%

Other Total 15.6%

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Office Total 14.2%

47.2% 61.1% 42.7% 57.8% 58.7% 58.2% 59.2% 54.9% 57.5% 52.3% 51.6% 49.1% 53.3%

August 2009 Geography • The top three states ranked by delinquency exposure have remained consistent since January 2009, as California, Texas, and Florida collectively accounted for over 30% of delinquency through July 2009. • The 10 largest states by delinquent unpaid balance reflect 62% of CMBS delinquency, while the 10 largest states by overall CMBS exposure reflect 53% of the CMBS universe. • The states of California and Texas remain a major concern at over 12% and 9% of CMBS delinquency respectively. By MSA, California delinquency is diversified while Texas delinquency is concentrated within the Houston and Dallas-Fort Worth MSAs (over 7% of CMBS delinquency), with each MSAs’ default percentage growing on a monthly basis (near 5% each). • While no MSAs topped 4% of CMBS delinquency in June 2009, only one (Phoenix, AZ) did so in July. • The 10 largest MSAs by delinquent unpaid balance reflect 33% of CMBS delinquency, while the 10 largest MSAs by overall CMBS exposure reflect 34% of the CMBS universe. Table 11 - Delinquency by State (source: Realpoint) State CA Total TX Total FL Total AZ Total MI Total GA Total NY Total OH Total NV Total IL Total Top 10 States

$ $ $ $ $ $ $ $ $ $ $

Current Balance 3,153,545,975.64 2,436,999,529.63 2,118,480,152.82 1,442,828,067.36 1,427,492,771.26 1,118,273,514.94 1,078,341,504.61 1,048,313,628.57 1,010,046,473.67 973,442,284.96 15,807,763,903.46

Loan Count 198 276 257 116 177 136 116 131 72 108 1,587

% of CMBS Universe 0.385% 0.297% 0.259% 0.176% 0.174% 0.137% 0.132% 0.128% 0.123% 0.119% 1.930%

% of CMBS Delinq. 12.279% 9.489% 8.249% 5.618% 5.558% 4.354% 4.199% 4.082% 3.933% 3.790% 61.551%

% of State Exposure 2.935% 4.810% 4.990% 7.974% 10.822% 5.573% 1.083% 7.083% 7.155% 3.881%

Table 12 - Delinquency by MSA (source: Realpoint) MSA Phoenix, AZ Total Houston, TX Total Detroit, MI Total Las Vegas, NV Total Atlanta, GA Total Dallas-Fort Worth, TX Total Chicago, IL Total New York, NY Total Los Angeles, CA Total San Francisco, CA Total Top 10 Totals

$ $ $ $ $ $ $ $ $ $ $

Current Balance 1,156,977,531.88 958,141,793.41 957,480,902.11 921,883,194.47 884,724,722.76 850,235,001.12 800,119,126.53 725,793,439.91 638,337,732.11 609,696,510.67 8,503,389,954.97

Loan Count 90 92 113 64 112 115 83 51 43 22 785

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% of CMBS Delinq. 4.505% 3.731% 3.728% 3.590% 3.445% 3.311% 3.115% 2.826% 2.486% 2.374% 33.110%

% of total MSA 7.734% 5.997% 11.213% 7.405% 5.467% 4.452% 3.793% 0.856% 1.656% 7.080%

August 2009 Issuance • In July 2009, over 96% of CMBS delinquency by deal type was found in fusion and conduit deals. • Of note by deal type is the 21% “kickout” loan transaction delinquencies. • The 2006 and 2007 vintage transactions topped the list when delinquency is ranked by year of issuance, accounting for over 53% of total delinquency. Both vintage years had an individual delinquency rate for their respective outstanding balance above the overall rate of 3.14%. • Deals issued from 2005 through 2007 now contribute over 70% of total delinquency, 2.2% of all CMBS. We feel this is a result of current market conditions and aggressive underwriting, and will lead to further special servicing exposure and ultimate liquidation activity. • Deals issued in 1998 through 2001 contribute over 11% of the total delinquency, 0.35% of all CMBS. Table 13 - Delinquency by Deal Type (source: Realpoint) Deal Type Fusion Total Unknown Total Conduit Total Kickout Total Grand Total

$ $ $ $ $

Current Balance 23,330,581,302.77 1,380,407,383.93 930,296,024.65 40,991,903.55 25,682,276,614.90

Loan Count 1,993 255 215 5 2,468

% of CMBS Universe 2.848% 0.169% 0.114% 0.005% 3.135%

% of CMBS Delinq. 90.843% 5.375% 3.622% 0.160% 100.000%

% of Deal Type 3.619% 1.506% 1.900% 21.186%

Note: Kickout Deal Type added to database in May 2008

Table 14 - Delinquency by Year of Issuance (source: Realpoint) Year 2006 Total 2007 Total 2005 Total 2004 Total 2003 Total 2001 Total 1998 Total 1999 Total 2000 Total 2002 Total Top 10 Totals

$ $ $ $ $ $ $ $ $ $ $

Total Year 7,211,163,838.10 6,626,970,534.89 4,180,747,608.71 2,489,649,671.29 1,105,263,532.53 867,981,496.32 707,611,810.67 663,547,853.59 607,263,747.45 560,741,720.63 25,020,941,814.18

Loan Count 606 434 401 216 116 133 139 130 100 83 2,358

% of CMBS Universe 0.880% 0.809% 0.510% 0.304% 0.135% 0.106% 0.086% 0.081% 0.074% 0.068% 3.054%

% of CMBS Delinq. 28.078% 25.804% 16.279% 9.694% 4.304% 3.380% 2.755% 2.584% 2.365% 2.183% 97.425%

% of Year Balance 3.632% 3.197% 2.709% 3.308% 2.217% 2.222% 6.241% 6.066% 2.449% 1.664%

Chart 9 - Delinquency by Year of Issuance: As % of Outstanding Vintage Balance (source: Realpoint)

CMBS Delinquency Exposure by Vintage: As % of Outstanding Vintage Balance 7.0%

Delinquency %

6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 1997

1998

1999

2000

2001

2002

2003

Vintage Year

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2004

2005

2006

2007

August 2009 Franchise Transactions • The delinquency rate for Franchise transactions remains erratic on a monthly basis (as reflected in the chart below). • Delinquency grew to 14.6% in December 2008, the highest it has been over the trailing-12 months, but fell to only 9.05% in June 2009 – a low for the trailing-12 months. • Franchise delinquency has averaged 12.6% over the trailing-12 months. • 502 franchise loans at $269.4 million have been liquidated since January 2006 at an average severity of 78%. This includes 76 loans at $31.5 million in 2007, 69 loans at $52.3 million in 2008, and 269 loans at $102.5 million to date in 2009. Chart 10 – Franchise Deal Delinquency (source: Realpoint)

16.000% 14.119%

14.394%

14.582% 14.147%

14.442%

14.096% 13.172%

13.341%

14.000%

11.284% 12.000% 9.324% 9.391%

10.000%

Percentage

9.045%

8.000%

6.000%

4.000%

2.000%

0.000% Aug-08

Sep-08

Oct-08

Nov-08

Dec-08

Jan-09 Feb-09 Month

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Mar-09

Apr-09

May-09

Jun-09

Jul-09

August 2009 Note: Realpoint has been tracking monthly commercial mortgage-backed securitization delinquency trends across various categories since January 2001. This report includes monthly breakdowns of delinquency for the entire Realpoint CMBS portfolio by delinquency category (30-day, 60-day, 90+-day, foreclosure, and real estate owned) along with exposure across each of the seven primary property types (healthcare, hotels, industrial, multifamily, office, retail, and other). Realpoint LLC Frank A. Innaurato Managing Director 267-960-6002 Robert Dobilas President / CEO 267-960-6001 _________________________________________________________________________________

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