Titan Europe 2006-3 — part of a CMBS deal put together by Credit Suisse — has been mentioned on FT Alphaville before.
The deal pooled commercial properties in France, Germany, the Netherlands, Belgium and Luxembourg, but some of Titan’s borrowers hit an event of default in 2008.
And now Titan has the dubious honour of being the CMBS deal with the biggest fall in the value of a property backing one of its loans. In fact, according to a notice published on Thursday, the market value fell a stunning 91 per cent since the deal was first priced.
From the notice:
An updated valuation of the security (the “Property”) has been received.
According to the Offering Circular at origination the market value of the Property was €135,000,000.
The Special Servicer has requested an updated valuation of the Property which was prepared as of 1 January 2010, estimates that the market value of the Property is €12,470,000.
The former principal tenant, Quelle GmbH is in liquidation and has exited the property. The property is subject to monumental protection in Germany. The property was purpose-built to the requirements of the former tenant and has restrictions on use. The costs of adapting the vacant building to new tenants, limitations on use and challenges in attracting new tenants resulted in a substantial reduction in value.
The plus side is that some analysts think that valuation is a tad exaggerated.
Here for instance is Michael Cox at Chalkhill Partners:
The servicer’s report says that the property is subject to restrictions on use and faces challenges in attracting new tenants, and this largely accounts for the fall in value. We think that for tricky properties like this, valuers have generally been overly pessimistic in their revised valuations, although it is clear that the loss of the tenant will have had a significant adverse impact on the value of the property.
In other CMBS news, the Property Finance Blog points out a bit of unusual activity; an upgrade of a CMBS deal by ratings agency Moody’s on Wednesday. Here’s the start of the statement:
Moody’s upgrades Class M and Class B CMBS Notes of Business Mortgage Finance No. 1 plc
Ratings of Class A, Class A DAC and MERC Notes withdrawn
London, 21 January 2010 — Moody’s Investors Service has taken the following rating actions on Notes issued by Business Mortgage Finance No. 1 plc (“BMF1″) (amounts reflect initial outstandings):
- GBP 100 million Class A Mortgage Backed Floating Rate Notes due 2036, ratings withdrawn; previously on 15 March 2004 assigned definitive Aaa ratings;
- Detachable Class A Coupons due 2036, ratings withdrawn; previously on 15 March 2004 assigned definitive Aaa ratings;
- GBP 23.5 million Class M Mortgage Backed Floating Rate Notes due 2036, upgraded to Aaa; previously on 20 November 2009 Aa1 placed under review for possible upgrade;
- GBP 9 million Class B Mortgage Backed Floating Rate Notes due 2036, upgraded to A1; previously on 20 November 2009 Baa1 placed under review for possibleupgrade;
- Mortgage Early Redemption Certificates due 2036, ratings withdrawn; previously on 15 March 2004 assigned definitive Aaa ratings. In total, approximately GBP 19.53 million of CMBS bonds outstanding have been affected by today’s rating action. As described further under sub-heading 3, “Rating Rationale”, the action taken today on the Class M and B Notes has been due to the increased subordination levels observed in the portfolio and the better than expected loss performance to date, both which more than compensate for Moody’s increased expected loss projection for the remaining transaction portfolio. The action taken on the Class A, A DAC and MERC Notes has been due to the redemption in full of the Class A Notes on 20 January 2010.
Segmented commercial property market, or what?
Related links:
Presenting the segmented commercial real estate crash – FT Alphaville
Looking at European retail rentals – FT Alphaville
“Losses on UK commercial real estate could equal subprime” – FT Alphaville