Realpoint Cmbs May 2009

May 2009

Monthly Delinquency Report - Commentary In April 2009, the delinquent unpaid balance for CMBS increased by an unprecedented $3.26 billion, up to a trailing 12-month high of $17.15 billion. Overall, the delinquent unpaid balance grew for the eighth straight month, up over 329% from one-year ago (when only $3.99 billion of delinquent balance was reported for April 2008), and is now over seven times the low point of $2.21 billion in March 2007. An increase in four of the five delinquent loan categories was noted in April, including over $1.96 billion in 30day delinquency. The distressed 90+-day, Foreclosure and REO categories grew in aggregate for the 17th straight month – up 15% from the previous month and over 260% in the past year. This increase far overshadows the $65.9 million in loan workouts and Table 1 - Trailing Three Months Delinquency Mar-09 Feb-09 Apr-09 liquidations reported for April 2009 across 18 loans. Nine UPB ($BB) UPB ($BB) UPB ($BB) Category of these loans at $40.99 million, however, experienced a $ 5.12 $ 3.16 $ 2.99 30-Day loss severity near or below 1%, most likely related to $ 2.13 $ 2.13 $ 2.01 60-Day workout fees, while the other nine loans at $24.9 million 90+-Day $ 6.40 $ 5.44 $ 4.29 Foreclosure $ 2.01 $ 1.68 $ 1.35 experienced an average loss severity near 61%. We $ 1.48 $ 1.49 $ 1.35 REO remain cautious regarding the increased delinquencies, $ 813.00 $ 820.61 $ 825.79 Current loan workout activity, and reported loss severities when Total CMBS $ 830.14 $ 834.50 $ 837.78 considering our expectations for the remainder of 2009. As Total CMBS Del. $ 17.15 $ 13.89 $ 11.99 additional pressures are placed on special servicers to Delinq. % 2.066% 1.664% 1.431% maximize returns in today’s 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 the end of 2009 into 2010. The total unpaid balance for all CMBS pools under review by Realpoint was $830.1 billion in April 2009, down from $834.5 billion in March. 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) $17.15

$18.00

$16.00 $13.89 $14.00 $11.99

$ (in billions)

$12.00

$10.79

$10.00

$8.68

$8.00

$7.03 $5.39

$6.00 $4.64 $4.01

$4.18

$4.20

$4.07

$4.00

$2.00

$0.00 May-08

Jun-08

Jul-08

Aug-08

Sep-08

Oct-08 Nov-08 Month

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Dec-08

Jan-09

Feb-09

Mar-09

Apr-09

May 2009 2.500%

2.066% 2.000% 1.664%

1.431% 1.500% Percentage

1.281%

1.025% 0.828%

1.000%

0.631% 0.543% 0.461%

0.483%

0.487%

0.472%

0.500%

0.000% May-08

Jun-08

Jul-08

Aug-08

Sep-08

Oct-08 Nov-08 Month

Dec-08

Jan-09

Feb-09

Mar-09

Apr-09

The resultant delinquency ratio for April 2009 surpassed 2.06%, up from 1.66% one month prior. Such a delinquency ratio is now seven times the Realpoint recorded low point of 0.283% from June 2007. In addition, the delinquency percentage through April 2009 is over four times the 0.46% reported one-year prior in April 2008. The increase in both delinquent unpaid balance and delinquency ratio over this time horizon reflects a steady increase from historic lows in mid-2007. Forecasted Delinquency by Balance and Percentage – Scenario Analysis Overall, we expect the delinquent unpaid CMBS balance to continue along its current trend and grow between $20 billion to $30 billion by mid year 2009, with the potential to grow closer to $40 billion before the end of 2009. Based upon an updated trend analysis, we expect the delinquency percentage to grow in excess of 4% before year-end 2009 (potentially approaching 5% under 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. Our scenario and trend analysis regarding recent default activity and the potential for future delinquency growth has shown the following: Scenario 1 (Six-Month Historical Assumptions): • •

Over the past six months, delinquency growth by unpaid balance has averaged roughly $1.96 billion per month, while the outstanding universe of CMBS under review has decreased on average by $4.05 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 top $36 billion and reflect a delinquency percentage slightly above 4.4% by December 2009.

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May 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), the delinquent unpaid balance would top $43 billion and reflect a delinquency percentage near 5.5% by December 2009.

Scenario 2 (Three-Month Historical Assumptions): •

Over the past three months, delinquency growth by unpaid balance has averaged roughly $2.12 billion per month, while the outstanding universe of CMBS under review has decreased on average by $4.2 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 top $38 billion and reflect a delinquency percentage slightly above 4.6% 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 top $45 billion and reflect a delinquency percentage above 5.7% by December 2009.

• •

Special Servicing Exposure and Other Trends Special servicing exposure has also been on the rise, having increased for the 12th straight month through April 2009. The unpaid balance for specially serviced CMBS increased by $4.22 billion in April 2009, up to a trailing 12-month high of $24.52 billion from $20.3 billion in March and $17.11 billion in February. The corresponding percentage of loans in special servicing also increased to 2.95% of all CMBS by unpaid balance in April 2009, up from 2.43% a month prior and only 0.47% in April 2007 and 0.65% April 2008. The overall trend of special servicing exposure since January 2005, by both unpaid balance and percentage, is presented in Charts 3 and 4 below. Charts 3 and 4 – Special Servicing Exposure: Balance vs. Percentage (source: Realpoint) Special Servicing Exposure by Unpaid Balance ($BB): January 2005 through April 2009 $30.00

$25.00

Apr-09, $24.52

$20.00

$15.00

Jan-09, $14.38

$10.00 Jan-05, $8.55 Jan-06, $5.57 $5.00

Jan-08, $4.53 Jan-07, $3.74

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May 2009 Special Servcing Exposure as % of Outstanding CMBS: January 2005 through April 2009 3.50%

3.00% Apr-09, 2.95%

2.50%

2.00%

Jan-05, 1.95% Jan-09, 1.71%

1.50% Jan-06, 1.00% 1.00%

Jan-07, 0.52% 0.50% Jan-08, 0.52%

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Table 2: Monthly Special Servicing Transfers Apr. 2009 Year Issued # of Loans Current Balance 2008 2 $ 38,712,682.61 2007 62 $ 1,031,113,177.49 2006 72 $ 1,531,526,479.35 2005 43 $ 524,092,342.68 2004 36 $ 819,491,843.26 2003 7 $ 57,860,946.38 2002 10 $ 115,012,261.34 2001 19 $ 115,917,398.01 2000 12 $ 65,416,438.31 1999 42 $ 164,522,533.36 1998 6 $ 20,883,501.00 1997 8 $ 20,310,155.17 Totals 319 $ 4,504,859,758.96

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Our default risk concerns for the 2005 to 2007 vintage transactions relative to underlying collateral performance and payment ability are more evident on a monthly basis. Both the volume and unpaid balance of CMBS loans transferred to special servicing on a monthly basis continues to raise questions about underlying credit stability in today’s market climate for these deals, as evidenced by table 2.

While new specially serviced loan transfers totaled $4.5 billion in April 2009 (compared to the net change in special servicing of $4.22 billion mentioned previously), an additional 177 loans at $3.086 billion of such balance were issued from 2005 through 2007. This figure reflected 69% of the current month’s transfers and 13% of total special servicing exposure in April 2009. Furthermore, over 56% of delinquent unpaid balance through April 2009 came from transactions issued in 2006 and 2007, with over 29% of all delinquency found in 2006-issued transactions. When we extend our review to include the 2005 vintage, an additional 15.5% of total delinquency is found; thus over 71.5% 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.

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May 2009 Chart 5 – Monthly Delinquent Unpaid Balance for 2005, 2006 and 2007 Vintage Transactions $6,000,000,000

$5,000,000,000

$4,000,000,000

$3,000,000,000

$2,000,000,000

$1,000,000,000

$Nov-08

Dec-08

Jan-09

Feb-09

Mar-09

Apr-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 $822.5 billion, with $16.85 billion delinquent – a 2.05% rate (up from only 0.66% six months prior). • When agency CMBS deals are removed from the equation, deals seasoned at least a year have a total unpaid balance of $792.8 billion, with $16.84 billion delinquent – a 2.12% rate (up from only 0.68% six months prior). • Conduit and fusion deals seasoned at least a year have a total unpaid balance of $698.8 billion, with $15.9 billion delinquent – a 2.27% rate (up from only 0.73% six months prior). Other concerns / dynamics within the CMBS deals we are monitoring which may affect the overall delinquency rate in 2009 include: •

• • •

Balloon default risk related to upcoming anticipated repayment dates (ARD's) or term maturity from highly seasoned transactions for both performing and non-performing loans coming due in the next 12 months that may be unable to secure adequate refinancing due to current credit market conditions, lack of financing availability, or further distressed collateral performance. Refinance and balloon default risk concerns from floating rate transactions, 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.

Page 5 of 14

• • •

May 2009 The unpaid balance related to loans underwritten in the past three years with DSCRs between 1.10 and 1.25 is very high, and 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. Additional stress on both the retail and lodging sectors as consumer spending declines and the U.S. economy weakens.

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). Through April 2009, newly reported CMBS delinquency continued to outpace monthly liquidations by a very high ratio, raising our concerns for further deterioration in the market. In April 2009, another $65.89 million in CMBS loan workouts and liquidations were reported at an overall average loss severity of 31.1% (shown in Table 3), above the 2008 average of 24.9% and the 2006 average of 30.2%, but below the 2007 average of 32.8%. We highlight, however, that nine of these loans at $40.99 million experienced a loss severity near or below 1%, most likely related to special servicing workout fees, while the remaining nine loans at $24.9 million experienced an average loss severity near 61% - a clearer reflection of true loss severity. We expect higher these 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. Table 3 – Liquidations for April 2009: Material Loss vs. Workout Fees, etc. (source: Realpoint) Deal ID CBAC0601 CBAC0601 CSF03C04 CSF04C03 CSF98C02 FUNB99C4 GCC05GG3 GCC06GG7 JPC02CI4

Pros ID 237 103 147 000090 161 156 122.000 106.000 000022

Loan Name 162 02FIXED/VARIABLE 58 05FIXED/VARIABLE Sprinkle Ridge Apartments Crown Garden Apartments Best Western - Wright Patterson Sunset Cove Apts . Northpark One Commerce Center Morgan Hill Technology Park

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

$ $ $ $ $ $ $ $ $ $

Balance Before Loss 376,895.87 130,590.69 1,378,343.41 3,355,164.22 1,607,463.37 525,513.05 3,340,525.15 5,000,000.00 9,181,996.31 24,896,492.07

Loss Amount $ 376,895.87 $ 94,980.62 $ 882,679.35 $ 879,882.87 $ 1,607,463.37 $ 95,786.98 $ 1,804,787.32 $ 3,499,120.71 $ 4,175,893.77 $ 13,417,490.86

Loss % 100.0% 72.7% 64.0% 26.2% 100.0% 18.2% 54.0% 70.0% 45.5% 61.2%

Loss Date 4/2/2009 4/13/2009 4/6/2009 4/11/2009 4/9/2009 4/10/2009 4/6/2009 4/1/2009 4/7/2009 Avg Severity

Deal ID BACM0001 CMAC99C1 CSF00C01 CSF02CK1 GMAC98C1 GMAC99C1 GMAC99C2 LBC98C04 LBC98C04

Pros ID 51447 62 99-05495 000149 000TA2394 000GMAC4200 GMAC4720 000257 000163

Loan Name Dutch Square Center Woodside at the Office Center College Park Shopping Center Rose Meadows Apartments Hollowbrook Offic e Bldgs. Victorian Square Apartments Pacific Coast Center North Grove Plaza Kings Bay Plaza

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

$ $ $ $ $ $ $ $ $ $

Balance Before Loss 21,148,454.81 3,246,239.67 4,061,200.29 299,382.87 2,110,059.32 2,800,660.37 3,538,591.37 1,283,860.98 2,505,743.53 40,994,193.21

$ $ $ $ $ $ $ $ $ $

Loss Amount 220,132.90 8,541.39 39,174.16 3,561.70 24,560.95 30,033.89 37,687.67 13,439.54 26,218.83 403,351.03

Loss % 1.0% 0.3% 1.0% 1.2% 1.2% 1.1% 1.1% 1.0% 1.0% 1.0%

Loss Date 4/3/2009 4/8/2009 4/2/2009 4/13/2009 4/8/2009 4/1/2009 4/10/2009 4/1/2009 4/1/2009 Avg Severity

Aggregate Total $

65,890,685.28

$ 13,820,841.89

31.1%

Avg Severity

Since January 2005, over $7.75 billion in CMBS liquidations have been realized, while 45 of the last 51 months have reported average loss severities below 40%, including 21 below 30%. While average loss severity increased slightly for the 12 months of 2007 when compared to 2006, monthly loan liquidations by unpaid balance declined significantly in 2007 when compared to 2006 (by 43% year-over-year). 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%.

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

Balance Before Loss

Loss Amount

Avg. Loss %

Apr-09

$

65,890,685.28

$

13,820,841.89

31.1%

Mar-09 Feb-09

$

157,538,109.76

$

38,348,045.97

50.7%

$ $

53,881,344.45 127,512,771.20

$ $

21,297,774.64 42,220,021.31

23.6% 37.1%

Jan-09

$

119,798,193.52

$

53,191,551.67

42.0%

Oct-08

$ $

134,819,667.87 93,685,039.57

$ $

25,028,932.54 8,286,575.46

27.6% 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%

$ $

201,914,661.89 158,520,022.07

$ $

56,467,662.03 31,146,059.73

30.4% 24.9%

Dec-08 Nov-08

Jun-08

$

81,930,650.64

$

19,632,531.51

16.5%

Mar-08

$ $

115,172,947.71 97,384,008.72

$ $

62,227,934.35 21,385,223.39

29.4% 19.6%

Feb-08 Jan-08

$

86,972,409.26

$

19,949,191.89

20.3%

$

58,557,636.99

$

18,181,773.24

32.1%

May-08 Apr-08

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. Therefore, to accurately account for such, the property type loss severity figures for 2009 presented in tables 5, 6 and 7 below are broken out by loss severity levels. Table 5 – Average Loss Severities by Property Type for 2009: All Liquidated Loans (source: Realpoint) Prop Type Hotel Average Industrial Average Multi-family Average Office Average Other Average Retail Average Grand Average

$ $ $ $ $ $ $

Balance Before Loss 54,367,436.10 14,519,822.10 117,488,556.00 138,385,465.81 812,732.59 79,248,898.09 404,822,910.69

Loss Amount $ 9,681,589.45 $ 4,230,288.29 $ 60,104,072.91 $ 14,109,665.74 $ 728,361.51 $ 26,832,705.91 $ 115,686,683.81

Loss % 60.8% 15.8% 37.5% 20.2% 87.2% 36.5% 36.7%

# of Loans 3 3 43 15 4 21 89

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

$ $ $ $ $ $ $

Balance Before Loss 11,380,566.84 9,181,996.31 94,507,685.44 19,753,468.72 812,732.59 37,778,448.19 173,414,898.09

Loss Amount $ 9,669,504.99 $ 4,175,893.77 $ 59,864,291.45 $ 13,210,570.04 $ 728,361.51 $ 26,407,692.40 $ 114,056,314.16

Loss % 91.2% 45.5% 53.3% 59.0% 87.2% 63.1% 59.8%

# of Loans 2 1 30 5 4 12 54

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 Retail Average Grand Average

$ $ $ $ $ $

Balance Before Loss 42,986,869.26 5,337,825.79 22,980,870.56 118,631,997.09 41,470,449.90 231,408,012.60

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$ $ $ $ $ $

Loss Amount 12,084.46 54,394.52 239,781.46 899,095.70 425,013.51 1,630,369.65

Loss % 0.03% 1.0% 1.1% 0.8% 1.0% 1.0%

# of Loans 1 2 13 10 9 35

May 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 18th straight month to $3.49 billion in April 2009 from $3.17 billion in March, despite ongoing liquidation activity. These figures had declined steadily for some time through mid-2007, reflective of expedited loan work outs, but continue to be replenished with new loans due to aggressive special servicing workout plans and borrowers claiming an inability to pay debt service. The chart below also shows the rapid growth of loans reflecting 30-day delinquency in the past six month, transitioning rapidly 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)

$7,000,000,000

$6,000,000,000

$ Delinq.

$5,000,000,000

$4,000,000,000

$3,000,000,000

$2,000,000,000

$1,000,000,000

$-

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

30-Day

60-Day

90+-Day

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Foreclosure

REO

May 2009 Property Type • Multifamily loans remained a poor performer in April 2009, with over a 3.6% delinquency rate (up from only 0.9% in January 2008 – a 300% increase). • Multifamily loans also are the greatest contributor to overall CMBS delinquency, at 0.73% of the CMBS universe and over 35% of total CMBS delinquency (increased from the prior month). • By dollar amount, multifamily loan delinquency is now up by an astounding $5.17 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 eight healthcare loans at 0.017% of the CMBS universe are delinquent, but such delinquent unpaid balance reflects 6% all healthcare collateral in CMBS. • As a percentage of total unpaid balance, month-over-month delinquencies for all seven categories increased by double digits from March to April 2009, led by other at 33% and multifamily at 31%. • In 2009 we expect retail delinquency to increase substantially 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. • In addition, the hotel sector will likely experience an increase in delinquency as both business and leisure travel slows further. 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 142,681,889.12 1,651,943,574.90 562,920,619.57 6,069,063,020.12 2,772,090,713.16 5,175,552,466.41 772,832,888.16 17,147,085,171.44

Loan Count 8 137 93 648 296 580 229 1,991

% of CMBS Universe 0.017% 0.199% 0.068% 0.731% 0.334% 0.623% 0.093% 2.066%

% of CMBS Delinq. 0.832% 9.634% 3.283% 35.394% 16.167% 30.183% 4.507% 100.000%

% of Property Type 6.016% 2.188% 1.534% 3.686% 1.199% 2.251% 0.861%

Chart 7 – Trailing Twelve Month Delinquency by Property Type (source: Realpoint)

Property Type Monthly Delinquency: as Percentage of CMBS Universe 0.80% 0.70% Percentage

0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% A M S J D N J Ma F O A J y- 0 un-0 ul- 08 ug- 0 ep- 0 ct -0 ov- 0 ec- 0 an-0 eb-0 ar -0 pr-0 9 9 8 9 8 8 8 8 9 8 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

May-08 3.8% 0.3% 0.2% 1.3% 0.2% 0.3% 0.2%

Jun-08 4.0% 0.3% 0.3% 1.3% 0.2% 0.3% 0.1%

Jul-08 4.0% 0.3% 0.4% 1.2% 0.3% 0.3% 0.2%

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%

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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%

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 2009 Special Servicing • Special servicing exposure increased for the 12th straight month to $24.52 billion in April 2009 from $20.3 billion in March and only $17.11 billion in February. • For the 17th straight month, the total unpaid principal balance for specially-serviced CMBS when compared to 12 months prior increased, by a high $18.85 billion in April 2009. Such exposure is up over 332% in the trailing-12 months. • Conversely, special servicing exposure was also below $4 billion for 11 straight months through October 2007. • By property type, special servicing exposure is heavily weighted towards multifamily collateral at 32%, now followed by retail at 30% and office at 17%. • Unpaid principal balance noted as current but specially-serviced decreased to a trailing 12-month low of $1.44 billion in July 2007, but has since increased to $10.35 billion in April 2009. • Within the 1.25% of CMBS current but specially-serviced, we found 117 loans with an unpaid principal balance over $20 million accounting for $7.05 billion, up from 95 loans at $5.59 billion a month prior. • Unpaid principal balance exceeded $50 million for 48 current but specially-serviced loans in April 2009, and exceeded $100 million for 21 loans. Such loans are highlighted by the $220 million and $140 million pari-passu loans on the Solana mixed use property, found in the BACM07C1 and JPC07L10 transactions, along with three loans totaling $586.9 million with a related borrower – Babcock & Brown – from CSM06C03, CSM06C04, and CSM06C05. Table 10 – Trailing Twelve Month Special Servicing Exposure (source: Realpoint) All Specially Serviced Month Apr-09 Mar-09 Feb-09 Jan-09 Dec-08 Nov-08 Oct-08 Sep-08 Aug-08 Jul-08 Jun-08 May-08 Apr-08

UPB*

Loans current but with the Special Servicer UPB % of CMBS

% of CMBS

$24.52 $20.30 $17.11 $14.38 $12.78 $10.14 $8.32 $7.23 $6.88 $6.45 $5.94 $5.68 $5.67 * Figures in billions

2.95% 2.43% 2.04% 1.71% 1.51% 1.20% 0.97% 0.85% 0.80% 0.75% 0.69% 0.65% 0.65%

$10.35 $8.39 $7.14 $5.87 $5.77 $4.31 $3.97 $3.50 $3.50 $3.01 $2.73 $2.54 $2.57

1.25% 1.01% 0.85% 0.70% 0.68% 0.51% 0.46% 0.41% 0.41% 0.35% 0.32% 0.29% 0.30%

Delinquent and Specially Serviced UPB % of CMBS SS $14.16 $11.91 $9.96 $8.51 $7.01 $5.83 $4.35 $3.73 $3.38 $3.44 $3.21 $3.14 $3.11

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

Property Type Stratification - Specially Serviced Assets

Retail Total 30%

Other Total 7%

Healthcare Total Hotel Total 1% 10% Industrial Total 3%

Multi-family Total 32% Office Total 17%

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57.8% 58.7% 58.2% 59.2% 54.9% 57.5% 52.3% 51.6% 49.1% 53.3% 54.0% 55.3% 54.8%

May 2009 Geography • The top three states ranked by delinquency exposure through April 2009 remained consistent with the prior two months, as Texas, California and Florida collectively accounted for nearly 31% of delinquency. • The 10 largest states by delinquent unpaid balance reflect 63% of CMBS delinquency, while the 10 largest states by overall CMBS exposure reflect 52% of the CMBS universe. • The state of Texas remains a major concern at over 11% of CMBS delinquency, concentrated within the Houston and Dallas-Fort Worth MSAs (almost 8% of CMBS delinquency); however, such MSAs reflect a fairly low percentage of total exposure in their respective MSAs (at less than 5%). • Three MSAs topped 4% of CMBS delinquency in April 2009 (consistent with the prior month). • The 10 largest MSAs by delinquent unpaid balance reflect 35% 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 TX Total CA Total FL Total MI Total AZ Total NY Total GA Total OH Total IL Total NV Total Top 10 States

$ $ $ $ $ $ $ $ $ $ $

Current Balance 1,897,654,539.07 1,796,965,999.85 1,581,879,022.18 923,774,203.94 883,199,881.39 848,566,158.54 824,503,872.41 791,173,163.79 670,582,289.45 645,169,047.22 10,863,468,177.84

Loan Count 230 130 202 133 76 106 112 117 80 49 1,235

% of CMBS Universe 0.229% 0.216% 0.191% 0.111% 0.106% 0.102% 0.099% 0.095% 0.081% 0.078% 1.309%

% of CMBS Delinq. 11.067% 10.480% 9.225% 5.387% 5.151% 4.949% 4.808% 4.614% 3.911% 3.763% 63.355%

% of State Exposure 3.687% 1.648% 3.689% 6.971% 4.852% 0.847% 4.066% 5.343% 2.645% 4.445%

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

$ $ $ $ $ $ $ $ $ $ $

Current Balance 753,317,300.22 748,935,065.66 710,351,522.06 673,899,358.87 642,501,956.68 600,796,568.81 581,726,729.51 554,313,015.57 419,605,661.87 399,986,142.41 6,085,433,321.66

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Loan Count 61 93 73 86 101 64 41 43 15 30 607

% of CMBS Delinq. 4.393% 4.368% 4.143% 3.930% 3.747% 3.504% 3.393% 3.233% 2.447% 2.333% 35.490%

% of total MSA 5.003% 4.572% 4.402% 7.853% 3.292% 2.820% 4.531% 0.651% 4.799% 5.031%

May 2009 Issuance • In April 2009, over 94% of CMBS delinquency by deal type was found in fusion and conduit deals. • Of note by deal type is the 16.9% “kickout” loan transaction delinquencies. • The 2006 and 2007 vintage transactions topped the list when delinquency is ranked by year of issuance, accounting for over 56% of total delinquency. Both vintage years had an individual delinquency rate over 2.2% of their respective outstanding balance, above the overall rate of 2.07% • Deals issued from 2005 through 2007 now contribute over 71% of the total delinquency, 1.5% 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 13% of the total delinquency, 0.27% of all CMBS. Table 13 - Delinquency by Deal Type (source: Realpoint) Deal Type Fusion Total Unknown Total Conduit Total Large Loan Total Kickout Total Grand Total

$ $ $ $ $ $

Current Balance Loan Count % of CMBS Universe % of CMBS Delinq. 15,306,483,534.36 1,507 1.844% 89.266% 882,688,759.27 282 0.106% 5.148% 875,744,247.04 195 0.105% 5.107% 43,741,049.52 1 0.005% 0.255% 38,427,581.25 6 0.005% 0.224% 17,147,085,171.44 1,991 2.066% 100.000% Note: Kickout Deal Type added to database in May 2008

% of Deal Type 2.351% 0.982% 1.713% 3.147% 16.925%

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

$ $ $ $ $ $ $ $ $ $ $

Total Year 5,006,399,800.37 4,617,850,155.39 2,650,981,708.27 1,069,731,879.40 665,796,709.94 581,398,210.27 567,063,293.73 532,737,861.45 494,291,896.27 430,911,006.30 16,617,162,521.39

Loan Count 481 315 372 162 105 84 112 113 92 71 1,907

% of CMBS Universe 0.603% 0.556% 0.319% 0.129% 0.080% 0.070% 0.068% 0.064% 0.060% 0.052% 2.002%

% of CMBS Delinq. 29.197% 26.931% 15.460% 6.239% 3.883% 3.391% 3.307% 3.107% 2.883% 2.513% 96.910%

% of Year Balance 2.504% 2.249% 1.700% 1.374% 1.692% 1.138% 5.051% 3.224% 1.974% 1.244%

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

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

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

May 2009 Franchise Transactions • The delinquency rate for Franchise transactions remains erratic on a monthly basis (as reflected in the chart below). • Delinquency grew to 19.13% in July 2008, the highest it has been over the trailing-12 months, but fell to only 9.4% in March 2009 – a low for the trailing-12 months. • Franchise delinquency has averaged 14.4% over the trailing-12 months. • 499 franchise loans at $263.95 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 266 loans at $97.03 million to date in 2009. Chart 10 – Franchise Deal Delinquency (source: Realpoint) 18.820% 19.128%

20.000%

18.000% 15.124% 16.000%

14.394%

14.442%

14.096% 14.582% 14.147%

14.119%

13.341%

14.000% 11.284% 12.000% 9.391% Percentage 10.000%

8.000%

6.000%

4.000%

2.000%

0.000% May-08

Jun-08

Jul-08

Aug-08

Sep-08

Oct-08 Nov-08 Month

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Dec-08

Jan-09

Feb-09

Mar-09

Apr-09

May 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 _________________________________________________________________________________

Copyright © 2009 Realpoint LLC The material contained herein (the “Material”) is being distributed in the United States by Realpoint LLC (“Realpoint”). Realpoint makes no representation as to its accuracy, timeliness or completeness and does not undertake to update any information or opinions contained in the Material. The Material is published solely for information purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or derivative. The Material is not to be construed as providing investment services in any state, country or jurisdiction. From time to time, Realpoint, its affiliates and subsidiaries and/or their officers and employees may perform other services for companies mentioned in the Material. Opinions expressed herein may differ from the opinions expressed by other divisions of Realpoint, its affiliates and subsidiaries. The Material has no regard to the specific investment objectives, financial situation and particular needs of any specific recipient of the Material and investments discussed may not be suitable for all investors. Investors should seek financial advice regarding the suitability of investing in any securities or following any investment strategies discussed in the Material. Past performance is not indicative of future returns. Certain assumptions may have been made in preparing the Material that has resulted in certain returns detailed herein and any changes thereto may have a material impact on any returns detailed. No representation is made that any returns detailed herein will be achieved. If an investment is denominated in a currency other than the investor's currency, changes in the rates of exchange may have an adverse effect on value, price or income. Realpoint LLC, 410 Horsham Road, Suite A., Horsham, PA 19044 (800) 299-1665

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