Fitch: U.S. CMBS Loan Delinquencies Continue to Rise through 2nd Quarter.

Business Editors

NEW YORK--(BUSINESS WIRE)--July 21, 2003

The dollar balance of U.S. loans 60-or-more-days delinquent in 380 Fitch-rated transactions increased from $2.8 billion to almost $3.4 billion in the second quarter of 2003, bringing the Fitch Loan Delinquency Index to 1.62%. The Index was 1.39% at the end of the first quarter 2003. Fitch expects the Loan Delinquency Index to reach 2% by year end and to continue to rise in the first half of 2004.

Increased delinquencies occurred on loans in all major property types except retail. The delinquent balance on retail loans declined by 6%, to $724 million, down from $764 million at the end of first-quarter 2003.

"While delinquent hotel and retail loans continue to dominate the Index, making up 60% of the total delinquent balance, there have been substantial increases in the delinquent balances of office, industrial, and multifamily loans over the past three months," said Mary O'Rourke, Senior Director, Fitch Ratings.

"Fitch expects loans secured by office and industrial properties to continue to demonstrate higher delinquency rates than they have experienced historically, while anticipating delinquencies in the retail sector will continue to level off over the remainder of the year unless there is another spate of large chain-store bankruptcies."

The delinquent office loan balance grew by 42% between first and second quarters, and the industrial loan delinquent balance increased by 54%. With both of those property types continuing to experience the effects of falling rents and increasing vacancies, Fitch expects to see the delinquency balances in those categories to continue to rise through the remainder of 2003 and into mid-year 2004. Although Fitch expects the delinquency balance in multifamily loans to rise, it anticipates a less dramatic increase than is currently being witnessed in the office and industrial sectors.

The delinquent balance of hotel loans increased by 27% over the second quarter and now stands at $1.27 billion, up from $1 billion at the end of 2003 first quarter. Regarding hotel loans, O'Rourke noted that, "hotel properties typically experience their peak occupancy during the summer months, so delinquencies in loans in that property sector should hold steady through third quarter, and barring any significant national or global events that negatively impact travel, hotel delinquencies could show some improvement by year end."

The Fitch Loan Delinquency Index is calculated on the balance of loans 60 or more days delinquent, and includes properties in foreclosure and real estate owned, in 380 Fitch-rated transactions.