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KBRA Releases Research - Canadian CMBS Loan Default and Loss Study
[November 16, 2023]

KBRA Releases Research - Canadian CMBS Loan Default and Loss Study


KBRA releases its Canadian CMBS loan default and loss study, which reviews Canadian commercial mortgage-backed securities (CMBS) loans generally originated for securitization between Q4 1998 and Q2 2022. The study population totals 3,599 loans with an aggregate securitization balance of CAD27.6 billion. As of Q2 2023, 431 loans totaling CAD3.4 billion are still outstanding. Most of the study population (77.2% by loan count, 71.4% by volume) consists of loans from pre-2008 vintages, with approximately one-half (in terms of count and volume) from the 2004-2007 vintages. Most of the study population includes loans that amortize (96.1%) over the loan term. Further, many of the loans have recourse provisions (70%), for the loans where this information was available (3,099).

The cumulative default rate within the study population is 3.8% (135 loans defaulted) based on the performance data from 1998 through Q2 2023. Of the defaulted loans, 100 have been resolved so far with an average resolution time of 20.6 months. With aggregate total losses of CAD44.7 million, the cumulative loss rate for the total population is 0.2%. The average loss severity of loans with losses is 5.9%, and the loss severity of loans with losses >2% is 39%.

Key Takeaways

  • A large portion of the defaulted loans occurred in 2020 (30.4%, 41 loans). Of these defaults, 34 loans are likely COVID-related forbearances, and if they were excluded the cumulative default rate would be 2.8%.
  • Lodging has the highest default rate and loss severity >2% of 19% and 57.8%, respectively. All other property types experienced default rates ranging between 0% and 4.1%.
  • The top four provinces account for 85.2% of the study population. The British Columbia province has the highest total default rate (including term and maturity) of 6.1% and the highest loss severity of 9%.
  • On average, loans with recourse have a slightly lower default rate of 3.9% compared to nonrecourse loans (4.1%). However, loss severities for loans with recourse provisions stood at 4.7%, or less than one-half the rate for norecourse loans (10.4%).
  • The retail and office sectors had fewer loans with recourse provisions (65.6%) compared to other property


    types (76.9%).
  • The 2013 securitization vintage has the highest annual default rate of 13.6%, which was partially influenced by the wildfires that ravaged the oil town of Fort McMurray, Alberta, in June 2016. The 2001 vintage had the highest loss severity and loss rate and experienced nine defaulted loans with only three realizing losses; however, their total losses aggregated CAD13.7 million and accounted for 30.5% of the study population's total losses.

Click here to view the report.

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About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA's ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.


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