TEXT-Fitch: turnaround continues for U.S. CMBS in 2013

Thu Dec 13, 2012 10:03am EST

Dec 13 - Positive momentum will likely continue for U.S. CMBS heading into
next year, according to Fitch Ratings in its outlook report for U.S. structured
finance.

CMBS loans may face macroeconomic pressures in 2013 particularly if the fiscal
cliff is not resolved. That said, 'CMBS has seen a wave of positive momentum
dating back to 2010, which coupled with past rating actions will provide ratings
stability next year, particularly for investment-grade CMBS,' said Managing
Director and Group Head Huxley Somerville. If the macro environment remains
stable, CMBS financing will expand. However, 'A substantial increase in CMBS
financing is unlikely in 2013 and the industry will be the stronger for it,'
said Somerville.

The continued stabilization of the commercial real estate market is very
dependent on the CMBS market. This makes the looming fiscal cliff a bit of a
concern. The macro environment is likely to turn negative if fiscal cliff
fallout takes place. If it meant prolonged market illiquidity, then property
fundamentals would be at risk, which in turn may lead to some weakness in CMBS
collateral performance. The prospect of rating downgrades in that scenario would
be marginal, with lower-rated tranches likely to absorb most of the ripple
effect.

From the standpoint of property types, income growth for both hotels and
multifamily properties has been strong over the past three years and next year
they may reach earlier peaks. Performance is likely to be mixed for both office
and retail properties. Major metro office markets will continue to see rental
growth while smaller and suburban markets will continue to exhibit weakness. As
for retail, strong properties will dominate weaker rivals which will continue to
suffer substantial declines in value if they lose tenants.

Additional information is available in Fitch's report, 'U.S. Structured Finance
2013 Outlook: Tailwinds Prevailing Despite Potential Drag', available at
'www.fitchratings.com or by clicking on the link at the end of the press
release.

Additional information is available at 'www.fitchratings.com'.

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U.S. Structured Finance 2013 Outlook: Tailwinds Prevailing Despite Potential
Drag
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