SECURITIZATION RESEARCH

U.S. CMBS Strategy | 11 June 2010

CMBS STRATEGY WEEKLY

Groundhog week
Market Monitor 2
Julia Tcherkassova +1 212-412-5977 Julia.Tcherkassova@barcap.com Keerthi Raghavan +1 212 412 7947 keerthi.raghavan@barcap.com www.barcap.com

CMBS trading volume remained low, and liquidity was somewhat constrained this week, as the market had very few bids, except for generic GG10 paper. We remain under the impression that investors prefer to stay on the side lines and are still unwilling to express a view on volatility at this point.

ASER reimbursements: An emerging trend

We had expected an emergence of a new trend, namely a sizable increase in ASER reimbursements to the bottom tranches as the liquidation volume started to pick up. This came to fruition as the three-month running average volume of ASER reimbursements hit its highest mark ever in the May remittance period at $10.5mn.

Appendix
Weekly new issuance.

12

PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES STARTING AFTER PAGE 12

Barclays Capital | CMBS Strategy Weekly

MARKET MONITOR

Groundhog Week
CMBS trading volume remained low, and liquidity was somewhat constrained this week, as the market had very few bids, except for generic GG10 paper. Even with the GG10s, although the intra-day trading recorded some fluctuations, the daily closing remained at the same level (+415) throughout the week. We remain under the impression that investors prefer to stay on the side lines, and although accounts have money to put to work, they are still unwilling to express a view on volatility at this point. An unclear direction for spreads, partially attributable to the further decline in fundamentals, is also contributing to the lower appetite (hopefully temporarily) in the sector. Even the broader market rally later in the week did not translate into the CMBS market. Apart from GG10s, there was some interest in more seasoned paper, particularly the last cash flow AAAs from 2001-03 vintages. On the new issue front, the A-1 (5.86y) and A-2 (9.64y) tranches of the new Freddie Mac K certificate $1bn deal (FHMS K007) priced yesterday at S+60 and S+80, respectively. Marketing of the deals unwrapped mezzanine pieces is anticipated next week. With the JP Morgan deal expected to price today and the CMSA conference coming next week, it is likely that the sector will regain its active mode later next week. For our focus article, concentrating on reimbursements of ASER-related interest shortfalls, please refer to page 3.

Views on a page
Comments Neutral on the basis We retain our neutral stance on the basis for now. We remain neutral on AMs and negative on most AJs and subordinate tranches using our current model variables and scenarios. We still prefer outright short positions in select CMBX tranches, such as A.3. Finally, we continue to focus on relative value or swap trades across and between CMBX series/classes: buy CMBX.A.4, sell CMBX.A.3; buy CMBX.AM.2, sell CMBX.AM.5. Recommendation Neutral on basis Sell A.3 outright Buy A.4, sell A.3 Buy AM.2, sell AM.5

CMBS index monitor

US agg. comp. Total return Jun. 4-Jun. 10 MTD Jun. 10 YTD 2010 Excess Return Versus: Treasuries Jun. 4-Jun. 10 MTD Jun. 10 YTD 2010 Swaps Jun. 4-Jun. 10 MTD Jun. 10 YTD 2010
Source: Barclays Capital

Inv. grade

High yield

AAA currentpay

AAA lockedout

AAA SD

All AAA

AA

BBB

BB

3 11 1,012

5 13 1,011

-7 -40 2,940

14 17 727

12 19 816

10 32 872

12 19 800

-1 16 1,316

-12 8 1,557

-28 -38 2,152

-34 -104 3,146

-21 5 684 -35 -6 662

-19 7 689 -33 -4 667

-30 -45 2,648

-5 12 471

-9 13 517

-14 26 538

-8 13 509 -23 1 490

-31 10 925

-43 2 1,143

-57 -44 1,761

-61 -110 2,806

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Barclays Capital | CMBS Strategy Weekly

CMBS

ASER Reimbursements: An emerging trend

Liquidations are up: What is next?
In a number of our recent publications we noted that CMBS loan liquidations finally started to pick up and continue to be on the rise. Not surprisingly, most of the recently liquidated loans were reappraised at some point prior to their disposition, triggering appraisal reduction amounts (ARAs) 1. As such, the majority of recently liquidated loans accumulated massive interest shortfalls in the form of ASERs 2 prior to their disposition. ASERs are a somewhat unique category among all factors contributing to interest shortfalls because, in most instances, they could be reimbursed to the investors upon the problem loan liquidation (or even prior to such disposition). This sets ASERs apart from other additional trust fund expenses that are typically non-reimbursable (eg, special servicing fees). The potentially reimbursable nature of ASERs also makes their forecast a critical factor when trying to estimate cash flow expected for the bottom tranches and could be important in the valuation technique employed for pricing these tranches. Finally, given the magnitude of recent revisions in the valuations of the CMBS underlying properties, often resulting in very sizable appraisal reductions, it is not surprising that ASERs constitute one of the biggest categories in the overall interest shortfall volume and therefore cannot be ignored.

Figure 1: ASER Reimbursements Historical Series ($ mn)

14 12 10 8 6 4 2 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Reimbursement upon liquidation Reimbursement prior to liqudiation 3m RA
Source: Loan Periodic Files, Barclays Capital

We anticipated an emergence of a new trend, namely a sizable increase in ASER reimbursements to the bottom tranches as the liquidation volume started to pick up. Our
Just as a reminder to our readers, servicers are typically required to continue advancing interest and principal only to the extent that they are deemed recoverable. If the servicer believes that the property value became impaired, often they would order a new appraisal that could be used to estimate an appraisal reduction amount. Typically, appraisal reduction amount is estimated as outstanding loan balance plus additional advances and expenses minus 90% of the new appraised value and minus funds available from the reserves, escrow and letter(s) of credit. 2 The acronym ASER stands for Appraisal Subordinate Entitlement Reduction. The term is typically used to define the difference between the full debt service payment (scheduled principal payment, if expected under the loan terms, and interest payment estimated at net coupon) and the amount that is actually advanced by the Master Servicer. While principal is typically advanced in full, interest payments are advanced only to the extent that is deemed recoverable.
1

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Barclays Capital | CMBS Strategy Weekly

expectations came to fruition as the three-month running average volume of ASER reimbursements hit its highest mark ever in the May remittance period at $10.5mn (Figure 1). This means that for each of the prior three months, on average, investors in the bottom tranches of CMBS deals were reimbursed $10.5mn of interest that was accrued but not paid to them (shortened) in the prior remittance periods. Specifically, May brought $11.2mn, April $12.6mn, and March $7.8mn worth of reimbursements.

Most ASERs are not lost, but just delayed

This trend illustrates our position that some of the interest shortfalls should not be interpreted as lost but simply delayed interest that is still due to the bondholders and could be reasonably expected to be paid upon the problem loan resolution (via liquidation or otherwise). In order to access the magnitude of reimbursements for specific bonds, we decided to take a closer look at the deals that experienced the substantial ASER recoveries (we decided to use a cut-off of $300K or greater on the deal collateral level) during the last remittance period. In May, as many as 135 deals had at least one loan with ASER that was either fully of partially recovered, generating about $11.2mn in ASER recoveries for the entire universe over the month. However, only 10 transactions out of these 135 saw substantial ASER recoveries (using our cut-off mark in excess of $300K). The list is shown in Figure 2. This table not only lists those deals that experienced the greatest ASER reimbursements on the collateral level, but also shows how ASERs contribute to the overall trust fund expenses.

Figure 2: 10 Deals with the largest ASER reimbursements in May 2010

CSFB 2005-C4
Reimbursement for Interest on Advances ASER Recoveries Additional ASER Special Servicing Fee Workout Fee Liquidation Fee Non-Recoverable Advances Other Expenses Interest on Outstanding Advances Interest Not Advanced Shortfall Due to Rate Modification Total Additional Trust Fund Expenses Reimbursed Interest Paid to Class 541,069 none (599,068) M 1,208,529 (167,568) (167,895) 22,289 21,429 4,346 (372,291) Q,S,T,U (394,048) K, L, M (381,583) H, J, K, L (48,113) L, M, N, O (77,543) K (220,819) M, N, P 91,565 168,936 none 799,754 none (3,403) 40,023 (34,601) (525,585) 29,165 31,128 (484,468) 38,840 14,236 219 (467,448) 41,346 5,505 242

HFCMC 2000PH1

LBUBS 2002-C2

JPMCC 2001CIB3
256 (449,417) 48,312 5,800 1,001

WBCMT 2005C20

CGCMT 2008-C7
7,118

GCCFC 2006GG7
4 (342,326) 207,113 57,333 332

JPMCC 2003CB7
5 (331,882) 83,874 12,446 126 14,612

BACM 2007-3
3,123 (328,117) 164,204 195,945 2,193

JPMCC 2007LD11

(882,389) 453,522 43,373 3,910

(352,276) 225,420 72,638 2,389

(327,480) 983,351 143,882

Note: ASER recoveries for WBCMT 2005-C20 were partially netted out by additional ASERs associated with the same loan. Source: Loan Periodic Files, Barclays Capital

Clearly, ASER recoveries in a single remittance period could be linked to a single or to multiple related or even unrelated loans. For example, reimbursements of interest shortfalls in LBUBS 2002-C2 (Q,S,T,U) were related to the ASER recovery associated with a single loan, Computer Sciences Building. However, in GCCFC 2006-GG7, reimbursement to the K
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tranche could be tracked down to ASER recoveries associated with two different loans, Pleasant Hill and Eastern Hills Center (Figure 3).

Figure 3: Specific Loan that contributed to the largest ASER reimbursements in May 2010
Deal Name BACM 2007-3 BACM 2007-3 BACM 2007-3 BACM 2007-3 BACM 2007-3 CGCMT 2008-C7 CGCMT 2008-C7 CSFB 2005-C4 GCCFC 2006-GG7 GCCFC 2006-GG7 HFCMC 2000-PH1 JPMCC 2001-CIB3 JPMCC 2003-CB7 JPMCC 2007-LD11 JPMCC 2007-LD11 LBUBS 2002-C2 WBCMT 2005-C20 Loan Name 655 Engineering Old Peachtree Commons Renaissance Mayflower Hotel Metropolis Shopping Center Garin Ranch Mall St. Vincent Steve and Barry's - Athens, GA Normandie Holdings Portfolio I Pleasant Hill Eastern Hills Center Tristar Tech Center 1988 Tarob Court Rainier Office Portfolio Worthington on the Beltway 1550 North Congress Computer Sciences Building Macon & Burlington Mall Pool Loan balance (May 10) 9,900,000 6,684,000 200,000,000 86,000,000 16,750,000 49,000,000 18,983,126 134,172,687 Most recent ASER (767) (7,202) (12,840) (304,128) (3,181) (90,510) (261,765) (525,585) (235,419) (106,906) (484,468) (449,417) (331,882) (319,394) (8,086) (467,448) (445,233) Total ASER 22,990 76,148 230,208 854,674 455,752 3,081,464 Liquidated? N N N N N N Y Y Y Y Y Y N Y Y Y N

Source: Loan Periodic Files, Barclays Capital

In some instances, investors see substantial interest recoveries on the bond level but not always
Substantial ASER recoveries could result in partial or full reimbursements of interest shortfalls to a single or even to multiple mezzanine tranche(s) in the same remittance period. For example, investors in the LBUBS 2002-C2 deal referenced above (tranches Q through U) saw in May substantial reimbursement of interest (almost $373K for all four tranches) related specifically to the ASER reimbursements (Pleasant Hill and Eastern Hills Center loans). Other deals with substantial reimbursements that were passed to the bond level in May were JPMCC 2001-CIB3 (tranches K through M), WBCMT 2005-C20 (tranches H through L), and HFCMC 2000-PH1 (tranche M) (Figure 2). It is not always the case that the direct impact of ASER reimbursements is visible on the bond level because these recoveries could be blended with (or even be overweighted by) other additional trust fund expenses resulting in the net effect of additional shortfalls rather than reimbursement of prior shortfalls. The perfect example of this phenomenon could be seen in the CSFB 2005-C4 deal where the overall monthly reimbursements for the May remittance period of $728K were more than netted out by other additional trust fund expenses (non-recoverable advances of $1.2mn and special servicing fees of $31K) resulting in net additional shortfalls of $541K (Figure 2). Therefore, even though bondholders in this deal still benefited from ASER reimbursements (in their absence, the interest shortfalls would have been even greater), the direct impact was not visible. A very similar situation occurred in the JPMCC 2007-LDP11 deal, where the ASER reimbursements of $327K (related to Worthington on the Beltway and 1550 North Congress loans) were more than netted out by the new ASERs of $983K triggered by other loans.
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Barclays Capital | CMBS Strategy Weekly

The good news is ASERs could be reimbursed prior to liquidation

The loan does not have to be liquidated before the investors see reimbursement of their interest linked to ASERs. Although most of the ASER reimbursements came from liquidations, a sizable reimbursement volume was related to loans that are still outstanding. For example, in April of 2010, $5.6mn out of the total $12.6mn worth of total reimbursements came from loans that were still outstanding (Figure 1 shows separately the monthly ASER reimbursement volume that came from liquidations and from loans that were still outstanding at each of the remittance periods under observation). Generally speaking, any scenario that improves the loan credit profile could potentially result in reduction of total outstanding ASERs (and as a result, partial or full reimbursement of interest while the loan remains outstanding). More likely scenarios include but are not limited to situations when: The loan is brought current (either by the existing borrower, who is negotiating some form of relief or modification, or by a new borrower if an original loan was assumed), servicers advances are reimbursed and ASERs are recovered. The $46.9mn 701 Gateway loan securitized in LBCMT 2007-C3 could serve as an illustration of this technique. Due to the low occupancy, cash flow generated by the underlying property has been insufficient to cover the debt service. However, the borrower cured the loan several times out-of-pocket, bringing it current in November of 2009 and, more recently, in April of 2009, while negotiating potential modification with the servicer. In both instances, the P&I advances were reimbursed and the ASERs were repaid. Proceeds from a partial principal prepayment were received and were sufficient to cover servicing advances and ASERs. One of the most recent examples is the Lightstone portfolio loan in JPMCC 2006-CB15. After the sale of one of the properties underlying this portfolio, Martinsburg Mall in April 2010, the proceeds were applied to reimburse the servicers advances and ASERs (benefiting G and H tranches), while the remaining proceeds were applied as a principal curtailment. The loan was brought current, and its actual balance was reduced from $73.8mn to $67.5mn. The original loan terms are modified (often, retroactively), and a new (potentially lower) monthly debt service level will potentially result in shortfalls due to modification rather than new ASERs; old accumulated ASERs are often reimbursed as part of the modification plan. Again, using one of the more recent examples, the $66.4mn JPIM Self Storage Portfolio loan in COMM 2006-C8 was modified and $26.4mn of the principal balance was written off (eliminating class S); however, over $600K worth of prior ASERs associated with this loan were reimbursed, reducing the additional trust fund expenses reported in April 2010. Underlying property was re-appraised higher, resulting in lower ARA and, as a result, lower ASERs (the higher the new appraisal, the higher is the percentage the servicer has to advance). We would like to re-emphasize that ASERs are not always reimbursable. For example, in cases of very low liquidation proceeds, the funds collected might not be sufficient to cover even the servicer advances and related expenses, and, as such, ASERs, which typically stand next in line, will not be entitled for reimbursements. Using the recent remittance period, a $5.5mn Cedar Pines loan in LBUBS 2000-C4 that accumulated more than $103K in ASERs over its life was liquidated. Since liquidation proceeds were very low, ASERs were not reimbursed (implying that investors in this deal should treat $103K as a non-reimbursable trust fund expense). Net liquidation proceeds on this loan were negative 9%.
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Barclays Capital | CMBS Strategy Weekly

Given that many of these bottom CMBS tranches were re-securitized in CRE CDOs, we believe that this emerging trend might have specific implications for selected CRE CDOs (while particular allocations of additional interest typically depend on the particular language of CRE CDO deals). As an example, we take a look at ARCAP 2004-1A. The three tranches from the JPMCC 2001-CIB3 deal highlighted in Figure 2 (L, M and N) received reimbursement of ASER related interest shortfalls in May. Based on available information, it appears that all three of these tranches were fully placed in ARCAP 2004-1A resecuritization. As such, we believe that this CDO might have received additional interest allocated to these tranches.

11 June 2010

Barclays Capital | CMBS Strategy Weekly

SPREAD MONITOR
Fixed-rate conduit/fusion over swaps (bp) and prices ($)
1-wk. chg. -1 0 -4 -2 0 0 0 0 0 0 6-month Avg. 199 303 323 403 71 44 16 11 9 9 High 207 437 447 551 81 57 17 12 9 9 Low
2,500

Credit curve (bar shows T6M min/max spreads)

3,000

Category Spread (bp) AAA 3y AAA 5y AAA 7y AAA sup dup AM AJ AA A BBB BBB-

6/10 206 296 319 379 74 51 17 12 9 9

185 245 246 276 62 36 16 11 9 8

1,000 500 0 AAA 3yr AAA 5yr AAA 7yr AAA SD AAA AM AJ 2,000 1,500

Spread comparison versus benchmark sectors

Agency debentures Term 5y 10y Libor OAS 0 21 CMBS AAA spread pick-up (bp) 6/10 296 359 6/3 300 349 6-mo. avg. 315 392 Category Autos AAA Cr. Cards AAA HEL AAA Credit Spread pick-up over CMBS IG index (bp) 6/10 -221 -240 -144 -170 6/3 -219 -238 -148 -178 6-mo. avg. -263 -279 -200 -220 Current Coupon OAD 6.2 MBS CMBS AAA spread pick-up (bp) 6/10 282 6/3 279 6-mo. avg. 303 Fixed-rate ABS Avg. life 3 yr. 5 yr. 5 yr. Spread (Libor) 77 76 934 CMBS spread pick-up (bp) 6/10 129 220 -638 6/3 130 219 -639 6-mo. avg. 186 299 118

Price ($)

Spread (Tsy) Credit index Industrials Financials CDX.IG.OTR* 182 162 258 126

Libor OAS 14

Note: *Protection Premium

11 June 2010

Barclays Capital | CMBS Strategy Weekly

THE SYNTHETIC SUPPLEMENT

CMBX price monitor
CMBX.NA (composite, $) 1-wk. chg. -0.4 -0.8 -1.1 -1.9 -1.0 -0.3 -0.2 0.0 6-month Avg. 85.6 74.8 55.4 35.6 28.8 18.3 17.0 5.0 High 86.8 83.3 66.0 45.2 37.3 22.4 21.0 5.6 Low 80.8 68.4 49.3 30.0 25.3 16.2 15.0 5.0 Rating AAA.1 AAA.2 AAA.3 AAA.4 BBB.1 BBB.2 BBB.3 BBB.4 6/10/10 93.1 91.8 87.2 85.5 36.2 23.9 18.4 20.1 CMBX.NA (composite, $) 1-wk. chg. -0.4 -0.4 -0.5 -0.7 -0.5 -0.3 -0.1 -0.2 6-month Avg. 93.1 90.1 86.0 84.3 32.0 20.8 16.1 18.2 High 95.4 94.0 92.0 91.4 39.8 25.5 21.0 22.4 Low 90.8 86.8 81.4 79.3 28.4 18.0 13.6 16.2

Rating AAA.5 AM.5 AJ.5 AA.5 A.5 BBB.5 BBB-.5 BB.5

6/10/10 86.9 75.0 56.8 41.3 32.6 20.0 19.0 5.0

Note: 6-month statistics and weekly change based on chained index (Series 1, 2, 3, 4 & 5). Source: Markit Partners, Barclays Capital

Basis watch
AAA CMBX-Cash Basis

0 -100 -200 -300 -400 -500 -600 -700 12/31/2008 2/28/2009 OTR CMBX AAA versus 2007+ LCF cash spreads

4/30/2009

6/30/2009

8/31/2009

10/31/2009 12/31/2009 2/28/2010

4/30/2010

Source: Markit Partners, Barclays Capital

TRX 1-month 6/10/10 Cash Index Jun-10 Sep-10 Dec-10 Mar-11 316 310 303 293 290 1-wk Chg 4 -7 -8 -7 -10 Avg. 305 311 305 298 291 High 325 335 329 324 315 Low 276 260 252 244 238

ABX 6-month Rating PEN AAA AA A BBB BBB6/10/10 74.1 53.6 15.9 5.5 7.2 6.5 1-wk Chg -0.6 -0.5 -0.1 0.1 0.0 0.0 Avg. 73.7 49.8 13.2 5.1 6.2 5.7 High 79.3 59.0 16.1 5.6 7.3 6.7 Low 70.5 43.8 10.5 4.7 4.9 4.7

Source: Markit Partners, Barclays Capital

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Barclays Capital | CMBS Strategy Weekly

CMBX Valuation (as of 6/9/2010)

Impl. Spd (bp) 155 366 554 866 1,281 2,012 2,522 161 418 703 1,159 1,561 2,639 3,233 236 510 1,138 1,768 2,349 3,432 4,146 283 519 1,116 1,843 2,518 4,012 4,162 252 484 973 1,600 2,393 3,968 4,103 Est Fair Px ($) Avg CS (%) 31.0 20.6 12.9 10.7 7.8 4.5 3.2 30.7 20.3 12.4 10.3 7.6 4.2 3.0 30.4 20.3 11.5 9.5 7.1 3.8 2.7 30.1 20.0 12.4 10.2 7.8 4.4 3.3 29.9 19.9 12.8 10.7 8.1 4.7 3.7 Bond Loss (%) Loss Timing (yr) TTM Daily Px Vol 0.6 0.4 1.3 1.4 1.4 1.2 0.9 0.8 0.5 1.5 1.4 1.4 0.8 0.6 1.0 0.7 1.5 1.1 0.9 0.6 0.4 1.0 0.9 1.4 1.1 1.1 0.6 0.5 0.9 0.8 1.4 1.2 1.0 0.5 0.5

CMBX AAA.1 AM.1 AJ.1 AA.1 A.1 BBB.1 BBB-.1 AAA.2 AM.2 AJ.2 AA.2 A.2 BBB.2 BBB-.2 AAA.3 AM.3 AJ.3 AA.3 A.3 BBB.3 BBB-.3 AAA.4 AM.4 AJ.4 AA.4 A.4 BBB.4 BBB-.4 AAA.5 AM.5 AJ.5 AA.5 A.5 BBB.5 BBB-.5

Cpn (bp) 10 50 84 25 35 76 134 7 50 109 15 25 60 87 8 50 147 27 62 200 320 35 50 96 165 348 500 500 35 50 98 175 350 500 500

Eff Cpn (bp) 10 50 84 25 34 69 106 7 50 109 14 24 57 56 8 50 147 26 54 163 211 35 50 96 165 348 413 319 35 50 98 175 350 438 331

Px ($) 93.1 85.2 79.0 65.0 53.0 36.0 27.1 91.7 81.1 71.9 52.1 42.0 23.8 18.0 87.1 75.8 56.5 35.4 26.5 18.4 16.1 85.4 74.0 53.0 37.1 31.1 20.0 19.0 86.7 74.9 56.8 41.7 32.6 20.0 19.0

Wt Avg 91.6 91.5 86.0 66.8 49.4 20.5 12.5 90.6 90.6 83.3 56.8 33.4 5.3 0.7 89.8 85.6 65.1 24.4 8.1 1.6 0.9 90.7 78.7 52.1 25.5 17.9 7.0 3.3 90.5 79.5 58.3 36.9 27.3 12.4 6.8

Base 92.1 92.0 90.5 77.2 58.7 23.3 12.4 91.0 91.4 92.4 67.3 38.9 3.1 0.2 90.3 89.9 77.0 26.1 5.1 1.2 0.8 91.1 86.5 60.2 25.7 17.4 6.7 3.4 91.1 84.5 67.2 40.5 28.5 12.8 6.9

Stress 89.6 89.8 74.6 35.7 17.1 1.6 0.9 89.0 88.5 59.7 22.8 4.0 -0.1 -0.3 88.2 77.1 26.0 2.5 0.8 0.4 0.3 89.0 59.7 18.1 8.9 6.0 2.8 1.3 88.5 65.5 29.1 12.4 7.9 2.8 1.5

Wt Avg 0.0 0.3 9.5 26.4 47.4 80.0 88.7 0.0 0.8 15.1 37.7 66.0 95.6 99.5 0.0 6.6 39.3 76.6 95.3 99.7 100.0 0.4 14.9 51.5 82.6 92.8 99.1 99.9 0.4 13.3 43.5 71.4 85.9 95.5 97.3

Base 0.0 0.0 4.2 13.4 36.5 77.1 89.3 0.0 0.0 4.1 24.4 60.0 98.2 100.0 0.0 1.1 25.1 75.6 100.0 100.0 100.0 0.2 4.1 42.4 83.5 94.6 100.0 100.0 0.2 6.7 32.6 68.4 86.6 96.0 97.1

Stress 0.0 0.8 22.0 64.4 84.5 100.0 100.0 0.0 1.8 43.0 79.1 99.9 100.0 100.0 0.0 16.5 85.9 100.0 100.0 100.0 100.0 0.8 39.8 90.7 96.6 100.0 100.0 100.0 1.0 30.2 78.6 96.8 100.0 100.0 100.0

Wt Avg 6.2 8.7 9.0 8.3 7.3 4.7 3.6 6.8 9.5 9.5 8.3 6.7 3.2 2.2 7.5 10.2 8.9 6.3 4.3 2.2 1.8 8.2 10.4 8.8 6.0 4.4 2.6 2.2 8.3 10.3 9.2 6.9 5.4 3.3 2.6

Base 5.8 8.4 9.1 9.0 8.0 5.0 3.7 6.5 9.2 9.9 9.0 7.4 3.1 2.1 7.2 10.1 9.6 7.0 4.5 2.2 1.8 7.9 10.6 9.6 6.3 4.6 2.6 2.2 7.9 10.3 9.8 7.4 5.8 3.4 2.6

Stress 7.9 10.4 9.7 7.0 5.5 2.9 2.4 8.2 11.1 9.4 7.0 4.5 2.1 1.8 9.0 11.2 7.3 3.8 2.6 1.9 1.6 9.6 10.8 6.7 4.1 3.1 2.1 1.9 9.9 10.9 7.8 5.1 3.5 2.2 2.1

Max Px 95.4 92.0 87.3 75.4 62.1 39.8 31.0 94.0 89.2 80.5 62.3 48.2 26.4 20.8 92.0 84.9 66.6 42.0 34.5 23.1 20.3 91.4 80.8 60.6 41.4 35.1 22.6 21.0 91.6 83.3 66.0 45.2 37.3 22.7 21.0

Min Px 84.4 84.7 50.3 36.0 26.5 17.0 14.1 76.4 76.7 40.9 24.4 18.2 12.4 10.8 69.6 68.9 30.2 17.3 15.0 11.4 10.5 67.7 65.1 28.5 17.1 15.0 11.3 10.5 67.7 68.4 28.6 17.0 15.0 11.3 10.5

Source: Barclays Capital

11 June 2010

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Barclays Capital | CMBS Strategy Weekly

RESEARCH CATALOG
Highlighted Publications/Presentations 05/04/2010 02/22/2010 02/09/2010 12/21/2009 12/03/2009
5

Surveillance Analytics

Keyword

Agency CMBS Primer: Freddie Mac K Certificates Program Theories of CMBS relativity Initial thoughts on AM CMBX CMBS 2010 Outlook: Mind the Gap(s) Five CMBS Stories Reaction to legacy CMBS TALF A slight pullback by S&P CRE Debt in Contraction Initial reaction to legacy CMBS terms Legacy TALF for CMBS: Updating upside PPIP: Time for detox CMBS in 2009: Deleveraging, defaults, and distress Negative CPA: Update on Commercial Property Values Near-term Refinancing Risk in Fixed-Rate CMBS Pools: An Update A Macro Approach to CRE Fundamentals/CMBS Losses: Part II A Macro Approach to CRE Fundamentals/CMBS Losses: Part I Pro Forma NowPerforming Later? CMBS: Chaos Theory CMBS Derivative Workshop A Guide to CMBS Loss-adjusted Yields CMBS Market Correction and Commercial Property Valuations Credit Performance by Property Market Size A Look at Early Stage Delinquencies The Commercial Real Estate Cycle and CMBS Evolving Collateral Trends: Paradigm Shift or Slippery Slope? Risk/Reward Across the CMBX Capital Structure Moodys-Lehman Brothers Study of Loss Severity in Defaulted CMBS Loans

The Surveillance Platform provides credit risk analysis for the entire US CMBS fixed rate universe CMBS Deal Portal CMBSDeal Click on deal name to access full suite of Surveillance Analytics Written analysis for all Delinquent and Specially Services Assets Bond Credit Evaluator Use for relative credit analysis for CMBS bid lists Calculators/Models CMBX Calculator CMBS Single Security Calculator CMBS Multiple Security Calculator CMBS Portal Pages Publications Access our latest research Market Monitor CMBX & Cash Spreads and Index Returns Calculators/Models CMBS/X Calculators and Models Overviews Surveillance Surveillance Tools and Reports Index Analysis CMBS Indices' Returns Charts Charts of relevant CMBS data series Surveillance Reports Delinquency Performance Reports Overall Performance Contributor Performance Deal Performance Property Type Performance State Performance Vintage Performance Prepayments List of Prepayments and Penalties Historical CPR Report CMBS CMBSMM CMBSCalc CMBSSurv CMBSIndex CMBSTSP CMBXCalc MCALC MSA CMBSCE A CUSIP driven report for comparing multiple bonds

09/03/2009 06/29/2009 06/16/2009 05/21/2009 04/20/2009 03/25/2009 01/09/2009 11/14/2008 09/08/2008 06/27/2008 06/20/2008 05/30/2008 05/01/2008 05/01/2008 04/11/2008 09/11/2007 06/29/2007 05/11/2007 03/21/2007 03/21/2007 03/21/2007 11/22/2004

Primers 06/26/2008 11/08/2007 03/17/2006 11/21/2005 CMBX Calculator on LehmanLive CMBX Valuation: Version 2.0 of Loss Dispersion Approach Introduction to CMBX Credit Default Swaps in CMBS: An Introduction

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Barclays Capital | CMBS Strategy Weekly

APPENDIX: CMBS NEW ISSUANCE SUMMARY

SingleFloating- Borrower/ Small Rate Asset Balance 0 0 0 0 0 1,900 303 0 1,426 0 0 0 0 0 0 Subordinate Debt Domestic Non-U.S. 0 0 0 0 0 3,007 2,774 4,160 3,080 1,181 0 1,655 552 470 0 2010 Total* 3,007 4,429 4,713 3,550 1,181 2010 Cum.* 3,007 7,436 12,149 15,699 16,879 2009 Total* 8,787 10,729 1,396 168 446 4,553 1,348 1,002 456 1,792 1,635 960 460 0 10,708 189,298 162,813 136,224 74,064 N/A N/A N/A N/A 0 0 1,438 20,865 27,128 19,688 13,093 N/A N/A N/A N/A 3,629 2,089 0 13,548 10,857 11,170 5,672 N/A N/A N/A N/A 0 80 0 2,367 N/A N/A N/A N/A N/A N/A N/A 10,112 8,055 3,674 3,166 7,452 4,625 6,220 N/A N/A N/A N/A 0 0 0 4,122 245 2,088 285 N/A N/A N/A N/A 0 0 0 0 615 0 0 N/A N/A N/A N/A 14,202 10,223 15,398 233,365 209,111 173,794 99,334 77,800 66,400 74,400 60,900 2,677 23,049 17,764 86,122 96,230 70,299 35,196 20,800 28,700 22,700 12,000 2,584 3,400 0 17,787 25,546 14,300 3,888 N/A N/A N/A N/A 16,879 33,272 33,162 319,487 305,340 244,093 134,530 98,600 95,100 97,100 72,900 33,272 2009 Cum.* 8,787 19,516 20,912 21,079 21,526 26,079 27,427 28,429 28,885 30,677 32,312 33,272

Month January February March April May June July August September October November December 2010 Total 2009 Total 2008 Total 2007 Total 2006 Total 2005 Total 2004 Total 2003 Total 2002 Total 2001 Total 2000 Total

Conduit 0 0 0 310 0

Agency Seasoned 1,107 2,471 4,160 1,344 1,181 0 0 0 0 0

CDO 840 651 123 150 743

Note: Year-to-date issuance includes all transactions priced through 6/10/2010. *CDO issuance is not included in the totals. Source: CM Alert

Cumulative Issuance $35,000 $30,000 $25,000 $20,000

Monthly $12,000 $10,000 $8,000 $6,000

$15,000 $10,000 $5,000 $0 Jan Feb Mar 2010 Total*

Source: CM Alert

$4,000 $2,000 $0 Apr May 2009 Total* Jun Jul Aug Sep Oct Nov Dec 2009 Cum.* 2010 Cum.*

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Analyst Certification(s) I, Julia Tcherkassova, hereby certify (1) that the views expressed in this research report accurately reflect my personal views about any or all of the subject securities or issuers referred to in this research report and (2) no part of our compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this research report. Important Disclosures For current important disclosures regarding companies that are the subject of this research report, please send a written request to: Barclays Capital Research Compliance, 745 Seventh Avenue, 17th Floor, New York, NY 10019 or refer to https://ecommerce.barcap.com/research/cgibin/all/disclosuresSearch.pl or call 212-526-1072. Barclays Capital does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that Barclays Capital may have a conflict of interest that could affect the objectivity of this report. Any reference to Barclays Capital includes its affiliates. Barclays Capital and/or an affiliate thereof (the "firm") regularly trades, generally deals as principal and generally provides liquidity (as market maker or otherwise) in the debt securities that are the subject of this research report (and related derivatives thereof). The firm's proprietary trading accounts may have either a long and / or short position in such securities and / or derivative instruments, which may pose a conflict with the interests of investing customers. Where permitted and subject to appropriate information barrier restrictions, the firm's fixed income research analysts regularly interact with its trading desk personnel to determine current prices of fixed income securities. The firm's fixed income research analyst(s) receive compensation based on various factors including, but not limited to, the quality of their work, the overall performance of the firm (including the profitability of the investment banking department), the profitability and revenues of the Fixed Income Division and the outstanding principal amount and trading value of, the profitability of, and the potential interest of the firms investing clients in research with respect to, the asset class covered by the analyst. To the extent that any historical pricing information was obtained from Barclays Capital trading desks, the firm makes no representation that it is accurate or complete. All levels, prices and spreads are historical and do not represent current market levels, prices or spreads, some or all of which may have changed since the publication of this document. Barclays Capital produces a variety of research products including, but not limited to, fundamental analysis, equity-linked analysis, quantitative analysis, and trade ideas. Recommendations contained in one type of research product may differ from recommendations contained in other types of research products, whether as a result of differing time horizons, methodologies, or otherwise.

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