CRE Distress Varies Widely Market to Market

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QuantumRisk CMBS Property Risk Analytics shows that CMBS defaults & losses vary across the US by city from 0.0% to 80.0% defaults & 0.0% to 78.0% loss severity. The key is to know which city to invest in or stay clear of.

QuantumRisk LLC, a Colorado Registered Investment Advisor has developed CMBS Property Risk Analytics** available as annual or monthly subscriptions. This monthly report shows that CMBS defaults & losses vary across the US by city from 0.0% to 80.0% defaults & 0.0% to 78.0% loss severities. We are also very pleased to announce that CoStar's Watch List featured some of our May 2010 analytics in their article, "Impact of CRE Distress Varies Widely Market to Market" receiving more than 10,000 reads within 24 hours.

A sample report for All Properties is available at http://www.QuantumRisk.com/

Every month we analyze reported data on more than 85,000 properties backing more than 52,000 loans to identify default probability, loss severity before recovery, loan to value ratio (LTV), debt service coverage ratio (DSCR), occupancy rates & change in property appraisal value for more than 400 U.S. markets, by property type, by city, by SMSA/MSA by state across the US. Five property type reports are generated: All Properties, Lodgings/Hotels, MultiFamily, Office & Retail.

To provide more insightful commercial real estate business intelligence to our clients QuantumRisk LLC invested more than $250,000 in research to develop the algorithms required to produce CMBS Property Risk Analytics on a monthly basis. If you are familiar with the raw CMBS data you know this is no small feat.

The purpose is for real estate professionals, sophisticated investors, investment bankers, underwriters and fund managers to know what is happening where it is happening when it is happening. Even the muni bond professionals and local & state governments can use this report to figure out what is happening in their local market, as the commercial real estate market is reflective of the local business environment and therefore reflective of the local economy.

The big surprise. Are single property loans a higher risk than multi-property loans?

Using this data we set up 2 pools of loans. The first pool consisted of 42,488 single property loans of all property types and the second of 2,177 multi-property & cross collateralized loans. The surprisingly result is that Multi-Property loans are worse (7.49% defaults & 7.19% loss severity) than Single-Property loans (5.94% defaults & 5.65% loss severity).

So much for the assumed portfolio diversification effects. With respect to losses, for a better understanding of how portfolio diversification does or does not work, see our blog post “Loss Containment: Portfolios” at http://QuantumRisk.WordPress.com/.

**Property Risk Analytics is the registered trademark of QuantumRisk LLC.

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Benjamin Solomon
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