Quarterly European CMBS Performance Update Q1 2010

Structured Finance www.fitchratings.com 28April2010 Commercial Mortgage Europe Performance Report Quarterly European CMBS Performance Update Q1 2010 Introduction According to some observers, lending to the European commercial property sector showed signs of improvement during Q1 2010, allowing participants to re‐enter the market for selective property acquisitions and developments. Savills reports larger lending appetite across European markets, with loan balances and loan‐to‐value ratios (LTVs) increasing and interest margins tightening, at least for loans backed by prime assets. In light of the number of loans approaching maturity in European CMBS, this ought to be good news; however, the majority of properties securing this asset class are of secondary or tertiary quality, categories shown short shrift by banks regardless of the wishes of bargain‐hunting property investors. Weak appetite for ordinary real estate exposure among banks is apparent from the number of maturing loans failing to repay, with extension or even default currently more typical outcomes. A list of upcoming loan maturities in the next 12 months can be found in the Appendix. Fitch issues monthly loan maturity bulletins to provide an update on loans maturing in the next three months, including their likely outcomes. A brief summary of the developments surrounding loan maturities between January and March 2010 can be found below in the Loan Maturity section. New Issuance in Q12010 Table 1: New Issuance in Q1 2010 Transaction Originator Final legal maturity Currency Rated/total issuance (m) Transaction type Country of collateral Plato No.1 S.A. HSH Nordbank AG Feb 20 EUR 730 (1,191.1) Multiborrower Europe Source: Fitch Only one European CMBS transaction rated by Fitch closed in Q1 2010, Plato No. 1 S.A., a managed securitisation initially of 17 loans secured on 46 commercial and 180 multifamily housing properties located in Belgium, France, Germany, the Netherlands and Spain. During the same period, two existing transactions paid in full: Feronia (European Loan Conduit No. 11) plc and Opera Finance (Lakeside) plc. The former was proceeding along its tail period until a loan that had been in special servicing since defaulting at loan maturity in July 2009 was finally refinanced in January 2010. The latter prepaid 18 months prior to scheduled loan maturity following the successful refinancing of the borrower. The fact that the owner of Lakeside, a super‐regional UK shopping centre of prime quality, obtained refinancing from seven banks adds clarity to a picture of banks willing to provide funding for exceptional assets, while also illustrating the exposure limitations to which individual lenders are subject. Analysts Mario Schmidt +44 20 7417 4232 mario.schmidt@fitchratings.com Gioia Dominedò +44 20 7417 4376 gioia.dominedo@fitchratings.com Euan Gatfield +44 20 7417 6306 euan.gatfield@fitchratings.com Related Research ∑ European CMBS Loan Maturity Bulletin (April 2010) ∑ Non‐UK European CMBS Performance ‐ Summary of Reviews and Rating Actions (April 2010) Contents Introduction.....................................1 New Issuance in Q1 2010......................1 Rating Actions in Q1 2010.....................2 Portfolio Updates...............................3 Transaction Updates...........................5 Loan Maturity.................................. 8 Securitisation News...........................11 Appendix A: Defaulted Loans................13 Appendix B: Loan Maturities.................16 Appendix C: Impaired Note Tranches.......20 Appendix D: Rating Actions in Q1 2010.....22 Appendix E: Publications in Q1 2010........26 Structured Finance Quarterly European CMBS Performance Update Q1 2010 April 2010 2 Rating Actions in Q12010 Table 2: Rating Actions in Q1 2010 Transaction type Upgrades Affirmations Downgrades RWN a Single borrower 0 35 8 1 Multiborrower 2 65 24 6 Non‐performing 0 0 2 1 Total 2 100 34 8 a RWN = Rating Watch Negative Source: Fitch Having completed its wholesale review of UK and continental European CMBS transactions between Q408 and Q409, Fitch has taken further negative rating action, dominated by multiborrower (MB) transactions: a total of 24 tranches from five transactions — Cornerstone Titan 2005‐2 plc, European Prime Real Estate No. 1 plc, Perseus (European Loan Conduit No. 22) plc, Taurus CMBS (Pan‐Europe) 2007‐1 Limited and Titan Europe 2007‐2 Limited — were downgraded and six tranches (all in Titan Europe 2006‐3 plc) were placed on Rating Watch Negative (RWN) during Q1 2010. There were only two downgrades of single borrower (SB) transactions between 1 January and 31 March 2010: three tranches in Vanwall Finance plc and five tranches in Alburn Real Estate Capital Limited had ratings lowered as a result of further value deterioration of the underlying collateral (UK retail warehouses and industrial propertie