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August 20, 2010

Structured Products Research

CMBS & Commercial Real Estate Marielle Jan de Beur, Senior Analyst
marielle.jandebeur@wachovia.com
212-214-8047
Chris van Heerden, CFA, Analyst
chris.vanheerden@wachovia.com
704-715-8321
Lad Duncan, Analyst
lad.duncan@wachovia.com
704-715-7423
Landon Frerich, Associate Analyst
landon.frerich@wachovia.com
704-715-8376

CMBS Weekly
Reviewing Principal Write-Downs

 The Moody’s CPPI index decreased 4.0% in June for its Contents
first monthly decline since March. Property prices are now Market Commentary 2
down 6.3% in the past year and 41.4% from the peak in Reviewing Principal Write-downs 3
October 2007, having recovered 4.2% since the low in Relative Value Matrix 5
October 2009. Apartment pricing is the only product type Weekly Charts 7
to have increased on a quarterly basis as well as a yearly
basis. Recent Research
CMBS Weekly: Investment Property Sales Volume
 Recently, there have been a growing number of losses Improving, August 13, 2010
resulting from modifications that allow part of the current
unpaid balance of a loan to be written-down. Once the CMBS Weekly: ReREMIC A-Pieces in Context of CMBS Up-
principal balance is reduced, a loss is passed through to the in-Credit Trades, August 6, 2010
trust, and the loan returns to the master servicer. Principal
CMBS Performance Monitor-July Summary, July 30, 2010
write-downs have flown under the radar due to the
historically small number and because they are difficult to CMBS Weekly: Southern California Property Markets, July
identify. 23, 2010

CMBS Weekly: Spread Update, July 15, 2010


 We identified 43 occurrences that have resulted in $170
million in principal forgiveness. We found only four CMBS 2010 Midyear Outlook, July 9, 2010
occurrences of principal write-downs in 2008. In 2009,
the number of write-downs jumped to 14 ($50.9 million in CMBS Weekly: Vintage Analysis by Property Type, June 25,
reductions) and in 2010 there have been 25 ($103.3 2010
million in reductions). CMBS Weekly: CRE Finance Council Notes, June 17, 2010

CMBS Weekly: Assessing Recent Liquidations and


Modifications, June 11, 2010

CMBS Weekly: A Detailed Guide to Freddie Mac K-


Certificates and the Multifamily Sector, June 4, 2010

CMBS Weekly: Spread Update, May 27, 2010

CMBS Weekly: Cross-Border Flows, May 21, 2010

Please see the disclosure appendix of this publication


for certification and disclosure information
This report is available on wellsfargo.com/research and on Bloomberg WFSP
Reviewing Principal Write-Downs WELLS FARGO SECURITIES, LLC
August 20, 2010 CMBS & COMMERCIAL REAL ESTATE

Market Commentary
Moodys CPPI Update

The Moody’s CPPI index decreased 4.0% in June for its first monthly decline since March.
Property prices are now down 6.3% in the past year and 41.4% from the peak in October 2007,
having recovered 4.2% since the low in October 2009. The number of repeat-sales transactions
used to calculate the index increased in June, with 153 repeat sales for a larger volume of nearly
$2.1 billion compared to 107 sales totaling $1.5 billion in May. We anticipate the index may
experience an additional 1%–3% decline before ultimately reaching bottom.

Exhibit 1: Moody’s CPPI Aggregate Index, August 2010


2
1.9
1.8
1.7
1.6
1.5
1.4
1.3
1.2 Data through June 30, 2010
1.1
1
0.9
2001-1

2001-7

2002-1

2002-7

2003-1

2003-7

2004-1

2004-7

2005-1

2005-7

2006-1

2006-7

2007-1

2007-7

2008-1

2008-7

2009-1

2009-7

2010-1
So urce: M IT Center fo r Real Estate, Real Capital A nalytics, M o o dy's Investo r Service, Wells Fargo Securities, LLC.

In quarterly data based on property type, the apartment and office sectors showed an increase in
pricing, while the industrial and retail sectors decreased. Apartment pricing is the only product
type to have increased on a quarterly basis as well as a yearly basis. The office sector showed an
increase from the prior quarter, but is down from a year earlier.

Exhibit 2: Moody’s CPPI


August 2010 Moody's/REAL Commercial Property Price Index and Change from Earlier Periods

Current Index 1 Month Earlier 1 Year Earlier 2 Years Earlier

National All Property Type Aggregate* 112.51 -4.0% -9.1% -33.5%


1 Quarter Earlier 1 Year Earlier 2 Years Earlier
National - Apartment** 135.27 4.0% 2.5% -22.5%
National - Industrial** 124.57 -2.9% -5.1% -27.0%
National - Office** 122.86 3.9% -4.7% -24.9%
National - Retail** 118.58 -10.9% -14.3% -32.5%
Most Recent Data through June 30, 2010 * Monthly Series through June 2010
Source: Moody's Investor Services ** Quarterly Series thru Q2 2010

More Stuyvesant Town News

Mezzanine debt holders, Pershing Square Capital Management and Winthrop Realty Services
(PSW), would not be allowed to foreclose on the Stuyvesant Town and Peter Cooper Village equity
pending a hearing on the matter on Sept. 2. The hearing has been scheduled in the New York
State Supreme Court after special servicer CWCapital filed a complaint asking for the terms of the
intercreditor agreement to be enforced. CWCapital has also agreed to stay its separate foreclosure
auction pending the hearing.

2
Reviewing Principal Write-Downs WELLS FARGO SECURITIES, LLC
August 20, 2010 CMBS & COMMERCIAL REAL ESTATE

Under the terms of the intercreditor agreement, the mezzanine lenders must cure all defaults
under the senior loan as a condition to acquiring the equity. In its complaint, CWCapital requests
1) a declaratory judgment that PSW or any purchaser of the equity must cure the default on the
mortgage before acquiring the equity as per the terms of the intercreditor agreement; 2) an
injunction against PSW from buying the equity at foreclosure without paying the total mortgage
balance outstanding; and 3) an injunction preventing PSW from drawing the property-owning
entities into bankruptcy.

Clearly, the best outcome for the CMBS market would be a decision that enforces the terms of the
intercreditor agreement and preserves the first-priority claim of the mortgage. Anything short of
this may introduce a new element of uncertainty.

Reviewing Principal Write-Downs


Losses in CMBS are usually related to a liquidation in which the property backing the loan is
foreclosed upon and sold or the lender accepts a discounted payoff. The loan is then removed
from the trust and a loss is realized. Recently, however, there have been a growing number of
losses resulting from modifications that allow part of the current unpaid balance of a loan to be
written-down. Once the principal balance is reduced, a loss is passed through to the trust, and the
loan returns to the master servicer. Principal write-downs have flown under the radar due to the
small number and because they are difficult to identify within the CMBS data.

Exhibit 3: CMBS Loans with Principal Write-downs


Principal Writedown
Orig Bal Cur Bal Writedown % of Orig Loan Modification Property
Deal Ticker Loan Name ($MM) ($MM) ($MM) Bal Assumed Date Type
JPMCC 2006-CB15 Landmark Building 8.50 3.55 4.81 56.5% Yes 18-Dec-09 OF
LBUBS 2004-C2 Shops at Cumberland Place 5.11 1.85 2.87 56.2% Yes 14-Jun-10 RT
MSC 2006-HQ8 The Shoppes at Mirador Square 8.30 3.50 4.63 55.8% No 30-Apr-10 RT
HCC 2006-1 Turtle Creek Apartments 14.46 7.00 7.25 50.2% Yes 05-May-10 MF
LBUBS 2007-C1 Lubbock Square Apartments 4.55 2.33 2.23 48.9% Yes 21-May-10 MF
CSFB 2005-C2 Providence Apartments 6.40 3.04 3.04 47.5% Yes 10-Jun-10 MF
MLMT 2006-C2 Casa Carranza Mesa 8.55 3.45 3.94 46.1% Yes 28-Apr-10 MF
GECMC 2003-C2 Crossings at Roswell 4.79 1.99 2.19 45.7% Yes 14-Jun-10 RT
LBUBS 2006-C7 Lakewood Apartment Portfolio 4.10 2.25 1.84 44.9% No 01-Jan-10 MF
BACM 2004-1 Sterling University Estates 10.69 5.07 4.72 44.2% Yes 11-Dec-08 MF
CD 2006-CD3 Spectrum Centre 7.00 3.96 2.96 42.3% No 29-Dec-09 OF
JPMCC 2007-LDPX Sagebrook Apartments - Las Vegas, NV 10.60 6.25 4.35 41.0% No 09-Mar-10 MF
CSFB 2005-C2 Indigo on Forest Apartments 37.00 20.01 15.14 40.9% Yes 10-Jun-10 MF
JPMCC 2007-LDPX Ashton Oaks Apartments 14.25 8.50 5.75 40.4% No 07-Apr-10 MF
COMM 2006-C8 University Commons - Urbana 16.58 9.92 6.66 40.2% Yes 15-Dec-08 MF
COMM 2006-C8 JPIM Self Storage Portfolio 66.40 40.00 26.40 39.8% Yes 18-Mar-10 SS
JPMCC 2007-LDPX Tanque Verde Apartments 17.30 11.00 6.30 36.4% Yes 25-Mar-10 MF
CSMC 2007-C1 La Vista Townhomes 7.47 4.75 2.67 35.8% Yes 22-Jun-09 MF
MLMT 2005-MCP1 HSA Industrial Portfolio I - EGL Eagle Global 63.00 11.70 22.32 35.4% Yes 29-Dec-09 IN
GECMC 2002-2A Sterling University Court 13.04 7.10 4.53 34.7% Yes 09-Dec-08 MF
MLCFC 2006-2 Brookview Apartments 4.89 3.25 1.59 32.5% Yes 22-Apr-10 MF
WBCMT 2007-C31 400 Centennial Parkway 5.18 3.50 1.68 32.4% No 11-Jan-10 OF
MSC 2005-IQ9 Bermuda Run 8.99 6.30 2.90 32.2% Yes 07-Jan-10 MF
CD 2006-CD3 2020 Hurley Way 8.00 4.63 2.30 28.8% No 11-Aug-09 OF
BACM 2005-5 Arboretum Apartments 19.00 13.00 5.40 28.4% Yes 30-Dec-09 MF
LBUBS 2007-C1 Bethany Blanding Place 16.70 12.00 4.70 28.1% Yes 26-Mar-10 MF
CGCMT 2007-C6 Serino's Italian Foods (A-1 note) 2.09 1.43 0.56 27.0% No 03-May-10 MU
JPMCC 2005-LDP4 The Crescent 8.80 6.50 2.17 24.6% No 30-Sep-09 OF
LBUBS 2006-C7 Edgewater & Westcourt Apartments 3.75 2.83 0.90 24.0% No 01-Jan-10 MF
MLMT 2006-C2 The Shops of Fairlawn (A note) 13.38 9.92 3.20 23.9% No 08-Dec-09 RT
CSMC 2006-C4 A&F Service Center 4.14 3.00 0.87 20.9% No 08-Jun-10 RT
MLMT 2006-C1 Country Inn & Suites - Deer Valley 7.39 4.52 1.50 20.3% No 01-Mar-10 LO
WBCMT 2007-C32 Sunset Ridge Center 6.00 4.00 1.05 17.5% No 25-Sep-09 RT
LBUBS 2006-C1 Palmiers Apartments 5.10 - 0.87 17.1% Yes 11-Mar-09 MF
MSC 2007-HQ11 Yearling Green Apartments 2.57 1.58 0.43 16.6% No 14-Dec-09 MF
MSC 2007-IQ14 Cedar Run Corporate Center 8.00 5.50 1.25 15.6% No 01-Jun-10 OF
MSC 2007-HQ11 Central Park I 4.24 3.43 0.63 14.9% No 01-Sep-08 RT
MSC 2005-IQ10 Corte Freccia 6.99 4.35 1.00 14.3% Yes 18-May-10 RT
BSCMS 2006-PW13 Days Inn Banning 2.44 2.03 0.25 10.2% No 23-Feb-10 LO
MSC 2006-IQ12 College Park Athens 12.00 9.74 1.18 9.8% Yes 23-Oct-09 MF
JPMCC 2005-LDP4 University Club 13.70 11.72 1.32 9.6% Yes 15-May-09 MF
CSMC 2007-C2 Tartan Square 3.24 2.60 0.25 7.6% No 01-Dec-09 RT
MLMT 2006-C2 The Lake in the Woods 13.29 12.47 0.18 1.3% No 08-Mar-10 MF
Source: Wells Fargo Securities, LLC, Trepp, LLC, and trustee reports.

3
Reviewing Principal Write-Downs WELLS FARGO SECURITIES, LLC
August 20, 2010 CMBS & COMMERCIAL REAL ESTATE

Using trustee reports and Trepp, we identified 43 occurrences that have resulted in $170 million
in principal forgiveness. We found four occurrences of principal write-downs in 2008. In 2009,
the number of write-downs jumped to 14 ($50.9 million), and in 2010 there have been 25 ($103.3
million). Based on what we have seen, principal write-downs fall into one of two categories. In
half of the cases, the original borrower remained in place and injected new equity into the
property in return for some forgiveness of principal. In the other instances, a principal reduction
occurred as a result of a loan assumption as the property was sold at a price below the unpaid
balance of the loan.

In many cases, when a principal reduction occurred other modifications were also made to the
loan such as extending the maturity date, switching the payments from amortizing to IO, and
reducing the note rate. One example is the Sagebrook Apartments loan in JPMCC 2007-LDPX,
which was modified in March 2010. In addition to a principal write-down of $4.35 million, the
maturity date was extended 30 months. The loan was originally set to mature in March 2012 and
now matures in September 2014. The IO period was also extended to the new maturity date. In
the case of the Sagebrook Apartments loan, the borrower provided written documentation that
the property was struggling due to the current economic environment and also contributed
$750,000 of new equity into the property.

Looking at write-downs as a percentage of the original loan balance, we find that the average
severity is 31% across all of the loans since 2008. The severity rate has risen, though, as the loans
that were modified in 2009 had an average of 25% compared to 34% for loans modified in 2010.
The severity rates are higher when the loans are assumed (36% on average) versus when the
original borrower remains in place (25% on average).

Trends among Principal Write-Downs

Most of the principal write-downs have happened to loans within the 2005 – 2007 vintages, with
only four occurring to pre-2005 vintage loans. Loans backed by multifamily properties have
experienced the largest number of principal reductions with 23, followed by retail with nine. The
number of multifamily loans is not surprising given the sharp decline in the performance of the
multifamily sector recently. Loans receiving principal write-downs have typically been smaller
balance loans as there have only been three loans with original balances above $20 million. Most
of the special servicers have granted principal reductions. JE Roberts has been the most active
with 17 loans.

Exhibit 4: Summary of Principal Write-Downs


Property Orig Loan
Vintage LnCnt Type LnCnt Size ($MM) LnCnt Special Servicer LnCnt
2007 13 MF 23 >20 3 JE Roberts 17
2006 18 RT 9 15 - 20 4 Midland 8
2005 8 OF 6 10 - 15 9 LNR Partners 7
2004 2 LO 2 5 - 10 16 CWCapital 6
2003 1 IN 1 1-5 11 C-III Asset Management 2
2002 1 MU 1 Helios AMC 2
SS 1 ING Clarion Partners 1
Source: Wells Fargo Securities, LLC, Trepp, LLC, and trustee reports.

Conclusion

While principal write-downs have historically been a less frequent cause of losses in CMBS than
liquidations, we expect the number of occurrences to increase given that in many workout
situations it is a better alternative.

4
Reviewing Principal Write-Downs WELLS FARGO SECURITIES, LLC
August 20, 2010 CMBS & COMMERCIAL REAL ESTATE

CMBS Relative Value Matrix


Recent Levels 52-week
Level as of 1-week 3-week 1-month Std. Deviation
8/19/10 Change Change Change Average High Low Dev from Avg.
SYNTHETICS
TRX
TRX.NA.AAA.1* 278 -8 -24 -33 358 512 235 76 -80
CMBX 1
AAA 113 -12 -14 -32 154 240 102 24 -41
AJ 387 -95 -71 -129 581 843 346 97 -194
AA 676 -94 -9 -69 948 1,366 561 189 -272
A 1,130 -97 17 -40 1,318 1,694 906 194 -187
BBB 2,074 -57 56 -6 2,241 3,024 1,808 249 -168
BBB- 2,779 -22 115 57 2,727 3,537 2,198 235 52
CMBX 2
AAA 124 -15 -14 -34 196 327 116 46 -72
AJ 571 -76 -30 -83 822 1,231 494 168 - 251
AA 993 -74 33 -61 1,323 1,818 237 260 - 330
A 1,463 -79 69 -16 1,753 2,512 1,293 282 - 290
BBB 2,698 -42 65 8 2,824 3,373 2,303 228 - 126
BBB- 3,223 -24 19 -22 3,349 3,679 2,810 196 - 126
BB 6,910 29 -107 -220 7,297 8,013 6,864 174 - 388
CMBX 3
AAA 162 -25 -29 -44 267 442 143 65 -106
AJ 928 -107 -35 -128 1,156 1,646 836 146 - 228
AA 1,692 -82 4 -84 1,812 2,354 1,367 181 - 120
A 2,278 -71 21 -43 2,397 2,904 1,759 211 - 120
BBB 3,505 -22 45 32 3,595 4,083 2,817 298 - 91
BBB- 4,167 -6 47 19 4,300 4,832 3,461 329 - 133
BB 11,482 30 -165 -268 11,588 12,457 10,045 689 - 106
CMBX 4
AAA 197 -23 -27 -43 312 475 175 68 - 115
AJ 950 -95 -28 -124 1,153 1,536 843 141 - 203
AA 1,786 -96 -27 -117 2,031 2,675 1,574 228 - 245
A 2,519 -70 24 -53 2,911 3,763 2,268 353 - 392
BBB 4,008 -20 36 1 4,311 5,227 3,613 349 - 303
BBB- 4,138 -14 35 4 4,532 5,541 3,889 398 - 395
BB 11,452 30 -170 -272 11,548 12,443 10,041 718 - 96
CMBX 5
AAA 185 -18 -19 -40 287 460 167 68 -102
AJ 813 -69 -11 -110 1,005 1,491 733 132 -192
AA 1,651 -67 -2 -68 1,870 2,638 1,459 235 -219
A 2,386 -73 17 -72 2,676 3,707 21 356 -289
BBB 3,964 -7 59 14 4,197 5,151 3,548 337 -233
BBB- 4,101 9 52 36 4,459 5,482 3,833 385 -357
BB 11,431 30 -173 -276 11,522 12,433 10,030 725 - 91

Corporate Indices (CDX)


IG14 5 YR 109 0 5 -1 101 131 76 13 8
HY14 5 YR 572 -4 18 -19 604 864 468 88 -33
LCDX14 5 YR 354 -2 11 -13 445 733 240 114 - 92
ITX.EU14 5 YR 109 -5 5 -10 93 142 65 17 16
Note: For all corporate CDS indices, we present historical data using on-the-run indices.
*TRX history dates back to the inception of the index on 9/9/2009.
Source: Bloomberg LP, Markit Group Ltd. and Wells Fargo Securities, LLC.

5
Reviewing Principal Write-Downs WELLS FARGO SECURITIES, LLC
August 20, 2010 CMBS & COMMERCIAL REAL ESTATE

CMBS Relative Value Matrix (continued)


Recent Levels 52-week
Level as of 1-week 3-week 1-month Std. Deviation
8/19/10 Change Change Change Average High Low Dev from Avg.
Swap Rates (%)
3 Yr 0.98 -0.07 -0.13 -0.18 1.69 2.18 0.98 0.26 -0.71
5 Yr 1.62 -0.07 -0.22 -0.28 2.53 2.99 1.61 0.32 -0.90
10 Yr 2.59 -0.16 -0.37 -0.38 3.53 4.02 2.56 0.31 -0.94
Swap Spreads (to UST)
3 Yr 24 0 1 1 35 53 13 9 -11
5 Yr 22 1 6 0 29 44 9 7 -7
10 Yr 2 2 4 -1 9 27 -9 7 -7
CMBS Cash (Spread to Swaps)
AAA 3YR 185 -5 -15 -25 273 400 175 79 -88
AAA 5YR 230 0 -15 -25 299 475 225 67 -69
AAA 7YR 245 0 -15 -25 314 500 240 70 -69
AAA Amortizing 7YR (AAB) 200 0 -10 -15 279 450 200 69 -79
AAA 2005 Vintage 10YR 155 -5 -10 -17 209 315 140 50 -54
AAA Supersenior 10YR 325 -5 -20 -50 456 625 300 94 -131
AAA Mezzanine 10YR 78-86 n/a n/a n/a 1,709 2,300 1,125 393 n/a
AAA Junior 10YR 55-75 n/a n/a n/a 2,522 3,000 1,475 615 n/a
AA 10YR ($)** 20-30 n/a n/a n/a 3,097 3,700 1,850 747 n/a
A 10 YR ($)** 15-20 n/a n/a n/a 3,900 4,525 2,500 845 n/a
BBB 10YR ($)** $10 n/a n/a n/a 5,538 5,600 5,475 759 n/a
BB 10YR ($)** $5 n/a n/a n/a 6,442 6,493 6,391 729 n/a
FNMA DUS 75 -3 -3 -3 72 95 52 12 3
UST
3 Yr UST 0.74 -0.07 -0.16 -0.19 1.34 1.75 0.74 0.23 -0.60
5 Yr UST 1.40 -0.09 -0.27 -0.29 2.23 2.74 1.38 0.30 -0.83
10 Yr UST 2.58 -0.17 -0.40 -0.37 3.44 3.99 2.56 0.30 -0.86
CMBS Cash - UST
AAA 3YR 204 -11 -17 -34 304 450 199 85 -100
AAA 5YR 248 -1 -15 -29 328 517 240 71 -79
AAA 7YR 269 1 -16 -23 336 523 260 67 -67
AAA Amortizing 7YR (AAB) 224 1 -11 -13 302 473 220 66 -78
AAA 2005 Vintage 10YR 177 -4 -4 -14 229 340 155 48 -52
AAA Supersenior 10YR 337 -6 -14 -45 466 650 304 96 -129
FNMA DUS - UST 77 -2 1 -2 81 108 47 15 - 4
Agency Pass-Thrus (FNMA 4.5%) 3 -0.1 0.0 -0.3 -45 17 -137 33 48
Agencies - Unsecured Debt
FNMA 10 YR -33 12 8 0 -12 27 -47 16 -21
FHLMC 10 YR 6 4 -2 -6 26 52 2 11 -20
Autos (yield%)
F 6.500 8/1/18 7 0 0 0 8 12 6 1 -2
Banks and Finance Companies
BAC 5YR CDS 151 -14 13 -1 133 178 92 21 18
C 5YR CDS 173 -12 13 -7 190 287 129 30 -18
GECC 5YR CDS 188 -16 2 -13 197 292 103 38 -9
JPM 5YR CDS 100 -9 12 -4 77 138 46 22 23
WFC 5YR CDS 102 -5 8 -3 113 139 70 12 -11
REIT Index* 239 1 1 -5 270 413 177 59 -31
*REIT Index spreads are as of 8/13/2010.
**Starting in 2009, we record dollar price levels for AM and lower rated cash CMBS tranches. 52-week historical information reflects
spread movement between Jan. 1, 2008 through Jan 1, 2009.
Source: Bloomberg LP, Markit Group Ltd. and Wells Fargo Securities, LLC.

6
Reviewing Principal Write-Downs WELLS FARGO SECURITIES, LLC
August 20, 2010 CMBS & COMMERCIAL REAL ESTATE

Weekly Charts
Historical CMBS Rating Actions by Year for Fixed-Rate Conduit Transactions
7,000 6,651

6,000

5,000
Numcer of Rating Actions

4,000

3,000 2,813 2,790

2,000
1,587
1,556

902 1,017
1,000 703
499
270 257 208 217 206 175
10021 127 145 94 87
26
-
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Upgrades Downgrades

*2010 actions are as of August 18, 2010. Ratings are for fixed-rate conduit deals.
Source: Wells Fargo Securities, LLC , Moody's, Fitch, DBRS, and S&P.

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Reviewing Principal Write-Downs WELLS FARGO SECURITIES, LLC
August 20, 2010 CMBS & COMMERCIAL REAL ESTATE

Historical 60+ Day CMBS Delinquencies (Fixed-Rate Conduit Deals)


11,000 9.00%
8.50%
10,000 New 30+ Delinq ($) 8.00%
9,000 7.50%
60+ Delinq (%)
7.00%
8,000 6.50%
30+ Delinq (%)
6.00%
7,000

% Delinquent
5.50%
$ Millions

6,000 5.00%
4.50%
5,000 4.00%
3.50%
4,000
3.00%
3,000 2.50%
2.00%
2,000 1.50%
1.00%
1,000
0.50%
0 0.00%
Apr-00
Jul-00

Apr-01
Jul-01

Apr-02
Jul-02

Apr-03
Jul-03

Apr-04
Jul-04

Apr-05
Jul-05

Apr-06
Jul-06

Apr-07
Jul-07

Apr-08
Jul-08

Apr-09
Jul-09

Apr-10
Jul-10
Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10
Oct-00

Oct-01

Oct-02

Oct-03

Oct-04

Oct-05

Oct-06

Oct-07

Oct-08

Oct-09
Source: Wells Fargo Securities, LLC, and Intex Solutions, Inc.

Current 60+ Day Delinquencies by Property Type (Fixed-Rate Conduit Deals)


Date Multifamily Retail Office Industrial Hotel Self-Storage Healthcare Other
Jul-10 12.87% 5.69% 5.58% 4.97% 13.41% 2.37% 2.94% 7.24%
Jun-10 13.00% 5.53% 5.33% 5.06% 13.21% 2.51% 2.62% 4.97%
May-10 12.81% 5.49% 5.07% 4.79% 12.77% 2.47% 2.45% 5.47%
Apr-10 12.72% 5.20% 4.26% 4.65% 12.78% 2.13% 2.70% 4.44%
Mar-10 11.99% 4.94% 3.91% 3.98% 11.19% 2.68% 2.81% 4.04%
Feb-10 8.95% 4.53% 3.57% 3.62% 10.55% 2.62% 3.03% 3.82%
Jan-10 8.38% 4.45% 3.10% 3.40% 9.74% 2.35% 2.88% 3.75%
4Q09 7.56% 3.85% 2.88% 3.05% 8.61% 2.31% 7.49% 4.04%
2Q09 4.67% 2.46% 1.63% 1.75% 2.92% 0.96% 6.25% 1.22%
4Q08 2.06% 0.74% 0.39% 0.54% 0.81% 0.13% 5.15% 0.52%
2Q08 1.24% 0.20% 0.19% 0.21% 0.20% 0.09% 4.23% 0.23%
4Q07 1.01% 0.11% 0.11% 0.14% 0.17% 0.11% 0.42% 0.19%
2Q07 0.58% 0.13% 0.16% 0.19% 0.47% 0.07% 0.46% 0.12%
4Q06 0.73% 0.17% 0.25% 0.64% 0.43% 0.09% 1.39% 0.19%
2Q06 1.01% 0.28% 0.38% 0.74% 0.83% 0.14% 2.90% 0.49%
4Q05 1.28% 0.28% 0.46% 1.08% 1.51% 0.12% 4.83% 0.64%
2Q05 1.65% 0.46% 0.65% 1.22% 2.34% 0.17% 4.92% 0.92%
4Q04 1.59% 0.69% 0.83% 1.56% 3.43% 0.13% 4.25% 1.14%
2Q04 1.65% 1.06% 1.03% 1.61% 5.44% 0.19% 4.89% 1.49%
4Q03 1.29% 1.19% 1.05% 1.46% 6.96% 0.10% 8.65% 1.98%
2Q03 0.87% 1.08% 0.70% 1.63% 7.82% 0.18% 7.72% 1.88%
4Q02 0.66% 1.20% 0.48% 1.04% 5.53% 0.20% 7.72% 1.84%
2Q02 0.54% 1.33% 0.41% 0.96% 5.82% 0.11% 7.52% 1.80%
4Q01 0.50% 0.84% 0.34% 0.49% 4.34% 0.13% 8.36% 1.84%
2Q01 0.35% 0.52% 0.19% 0.38% 1.78% 0.04% 7.78% 1.25%
4Q00 0.26% 0.43% 0.17% 0.45% 1.28% 0.05% 4.82% 1.32%
2Q00 0.24% 0.63% 0.18% 0.40% 1.13% 0.00% 3.23% 0.16%
Sources: Wells Fargo Securities, LLC, Intex Solutions, Inc., Trepp, LLC.

8
Reviewing Principal Write-Downs WELLS FARGO SECURITIES, LLC
August 20, 2010 CMBS & COMMERCIAL REAL ESTATE

Cumulative Defaults by Vintage (Fixed-Rate Conduit Deals)


Date 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Jul-10 15.18% 13.35% 13.69% 12.01% 12.89% 16.18% 10.46% 6.76% 5.43% 7.74% 9.41% 10.02% 11.22% 12.24%
Jun-10 15.18% 13.35% 13.65% 11.83% 12.85% 15.65% 10.22% 6.68% 4.97% 7.67% 8.64% 9.72% 10.73% 11.94%
May-10 15.18% 13.19% 13.65% 11.78% 12.74% 15.19% 9.94% 6.61% 4.80% 7.47% 8.09% 9.24% 10.43% 11.84%
Apr-10 15.18% 13.19% 13.65% 11.72% 12.46% 14.43% 9.63% 6.49% 4.61% 7.17% 7.43% 8.65% 9.70% 10.57%
Mar-10 15.18% 13.52% 13.64% 11.67% 12.31% 13.74% 9.57% 6.40% 4.36% 6.84% 6.91% 8.23% 8.71% 9.41%
Feb-10 15.18% 13.52% 13.58% 11.62% 12.23% 12.96% 9.30% 6.14% 4.27% 6.42% 6.20% 7.55% 6.76% 8.14%
Jan-10 15.18% 13.52% 13.53% 11.53% 12.08% 12.59% 8.94% 5.98% 4.17% 6.09% 5.60% 6.93% 6.31% 7.26%
4Q09 15.18% 13.51% 13.53% 11.49% 11.49% 12.10% 8.75% 5.69% 3.98% 5.40% 5.11% 6.26% 5.86% 6.28%
2Q09 14.90% 13.44% 13.26% 11.20% 9.73% 10.53% 7.17% 4.28% 2.25% 3.00% 2.39% 3.29% 2.98% 3.27%
4Q08 14.90% 13.12% 12.92% 10.47% 8.39% 8.99% 6.24% 3.33% 1.66% 1.41% 1.10% 1.05% 0.66% 2.23%
2Q08 14.90% 13.12% 12.85% 9.46% 7.47% 8.44% 5.63% 3.01% 1.30% 0.91% 0.77% 0.47% 0.20% 0.00%
4Q07 14.87% 12.84% 12.67% 8.46% 7.30% 8.14% 5.22% 2.85% 1.10% 0.69% 0.59% 0.35% 0.07%
2Q07 14.87% 12.79% 12.57% 8.02% 7.19% 7.84% 4.99% 2.29% 0.87% 0.48% 0.37% 0.07% 0.01%
4Q06 14.87% 12.70% 12.31% 7.92% 7.07% 7.54% 4.77% 2.02% 0.77% 0.42% 0.27% 0.02%
2Q06 14.87% 12.58% 11.20% 7.60% 6.84% 7.33% 4.48% 1.76% 0.71% 0.37% 0.14% 0.00%
4Q05 14.63% 11.80% 10.45% 6.81% 5.92% 6.21% 3.57% 1.16% 0.38% 0.08% 0.00%
2Q05 14.87% 12.00% 10.89% 7.18% 6.49% 7.04% 4.26% 1.51% 0.59% 0.18% 0.07%
4Q04 14.32% 11.67% 9.95% 6.30% 5.08% 5.33% 2.80% 1.02% 0.22% 0.01%
2Q04 14.30% 11.28% 9.33% 5.83% 4.43% 4.77% 2.05% 0.66% 0.05% 0.00%
4Q03 13.91% 10.38% 7.75% 5.15% 3.60% 3.79% 1.56% 0.36% 0.03%
2Q03 12.51% 9.40% 6.53% 4.25% 2.83% 2.90% 1.04% 0.19% 0.01%
4Q02 10.86% 8.66% 5.36% 3.31% 1.85% 1.98% 0.64% 0.08%
2Q02 9.40% 8.11% 4.70% 2.88% 1.52% 1.40% 0.24% 0.00%
4Q01 5.94% 5.79% 3.55% 2.16% 1.15% 0.62% 0.06%
2Q01 5.20% 4.82% 2.18% 1.68% 0.60% 0.16% 0.00%
4Q00 4.76% 3.83% 1.88% 1.10% 0.35% 0.04%
2Q00 4.61% 3.27% 1.39% 0.87% 0.11% 0.00%
Defaults are loans reaching 60+ days delinquent.
Sources: Wells Fargo Securities, LLC, Intex Solutions, Inc., Trepp, LLC.

Cumulative Losses by Vintage (Fixed-Rate Conduit Deals)


Date 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Jul-10 2.89% 3.34% 2.77% 2.19% 1.93% 2.34% 1.59% 1.02% 0.47% 0.43% 0.39% 0.36% 0.24% 0.31%
Jun-10 2.89% 3.34% 2.77% 2.16% 1.88% 2.22% 1.49% 0.98% 0.45% 0.40% 0.35% 0.30% 0.19% 0.21%
May-10 2.87% 3.34% 2.77% 2.06% 1.83% 2.21% 1.40% 0.95% 0.33% 0.37% 0.29% 0.23% 0.15% 0.20%
Apr-10 2.87% 3.34% 2.76% 2.05% 1.80% 2.08% 1.35% 0.89% 0.30% 0.32% 0.28% 0.21% 0.13% 0.20%
Mar-10 2.87% 3.34% 2.67% 2.02% 1.74% 1.92% 1.31% 0.84% 0.26% 0.30% 0.24% 0.18% 0.10% 0.07%
Feb-10 2.87% 3.34% 2.67% 2.00% 1.67% 1.90% 1.29% 0.83% 0.25% 0.27% 0.20% 0.13% 0.06% 0.07%
Jan-10 2.87% 3.34% 2.64% 1.99% 1.65% 1.88% 1.26% 0.78% 0.25% 0.26% 0.18% 0.12% 0.05% 0.07%
4Q09 2.87% 3.33% 2.64% 1.99% 1.60% 1.86% 1.24% 0.74% 0.24% 0.23% 0.16% 0.13% 0.04% 0.07%
2Q09 2.87% 3.33% 2.61% 1.88% 1.50% 1.63% 1.05% 0.55% 0.17% 0.13% 0.07% 0.02% 0.01% 0.00%
4Q08 2.87% 3.24% 2.58% 1.83% 1.44% 1.55% 0.99% 0.49% 0.15% 0.12% 0.04% 0.01% 0.00% 0.00%
2Q08 2.87% 3.24% 2.57% 1.79% 1.43% 1.52% 0.95% 0.46% 0.08% 0.09% 0.02% 0.00% 0.00% 0.00%
4Q07 2.87% 3.24% 2.56% 1.77% 1.38% 1.45% 0.88% 0.45% 0.07% 0.05% 0.01% 0.00% 0.00%
2Q07 2.87% 3.21% 2.49% 1.71% 1.27% 1.36% 0.83% 0.40% 0.05% 0.02% 0.01% 0.00% 0.00%
4Q06 2.79% 2.90% 2.40% 1.64% 1.18% 1.29% 0.73% 0.23% 0.03% 0.01% 0.00% 0.00%
2Q06 2.79% 2.66% 2.19% 1.52% 1.02% 1.19% 0.56% 0.22% 0.02% 0.00% 0.00% 0.00%
4Q05 2.79% 2.38% 2.04% 1.43% 0.89% 1.06% 0.47% 0.17% 0.02% 0.00% 0.00%
2Q05 2.79% 2.13% 1.68% 1.32% 0.74% 0.88% 0.27% 0.11% 0.02% 0.00% 0.00%
4Q04 2.43% 1.93% 1.45% 1.09% 0.59% 0.59% 0.21% 0.05% 0.00% 0.00%
2Q04 1.88% 1.45% 1.20% 0.91% 0.43% 0.43% 0.12% 0.02% 0.00% 0.00%
4Q03 1.54% 0.85% 1.01% 0.59% 0.32% 0.32% 0.08% 0.01% 0.00%
2Q03 1.24% 0.68% 0.69% 0.44% 0.15% 0.18% 0.04% 0.00% 0.00%
4Q02 0.85% 0.44% 0.38% 0.25% 0.09% 0.07% 0.02% 0.00%
2Q02 0.77% 0.22% 0.26% 0.11% 0.04% 0.01% 0.01% 0.00%
4Q01 0.29% 0.10% 0.10% 0.06% 0.01% 0.00% 0.00%
2Q01 0.23% 0.09% 0.05% 0.04% 0.00% 0.00% 0.00%
4Q00 0.12% 0.05% 0.03% 0.02% 0.00% 0.00%
2Q00 0.05% 0.03% 0.00% 0.01% 0.00% 0.00%
Sources: Wells Fargo Securities, LLC, Intex Solutions, Inc., Trepp, LLC.

9
Reviewing Principal Write-Downs WELLS FARGO SECURITIES, LLC
August 20, 2010 CMBS & COMMERCIAL REAL ESTATE

Future Maturities by Deal Vintage ($billion outstanding) – Fixed-Rate Conduit Deals


Month 1995-1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 TOTALS
Ext.* 0.52 0.87 1.38 0.14 0.07 0.53 1.18 2.53 0.03 0.05 0.00 7.29
Mat.** 0.02 0.08 0.47 0.04 0.00 0.17 0.05 1.20 0.00 0.01 0.00 2.04
2010 0.16 0.14 1.57 2.14 0.13 0.98 0.67 4.03 2.29 0.13 0.00 12.22
2011 0.32 0.21 0.11 12.39 3.43 0.29 4.76 2.69 12.37 2.70 0.00 39.28
2012 1.07 0.11 0.18 0.18 13.50 4.63 0.61 8.67 1.94 24.65 0.76 56.30
2013 1.71 1.24 0.17 0.30 0.22 21.68 6.53 0.88 4.56 3.18 0.30 40.79
2014 0.09 0.21 0.07 0.11 0.03 0.72 32.21 8.72 0.66 9.29 0.48 52.59
2015 0.06 0.09 0.16 0.06 0.01 0.29 0.67 80.08 15.81 0.80 0.01 98.04
2016 0.20 0.03 0.03 0.36 0.14 0.10 0.74 1.41 113.12 18.49 0.10 134.72
2017 0.71 0.03 0.03 0.02 0.24 0.17 0.12 1.00 1.42 126.27 6.31 136.31
2018 0.75 0.40 0.04 0.08 0.01 0.54 0.31 0.15 1.01 1.23 2.45 6.97
2019 0.16 0.18 0.04 0.03 0.04 0.05 0.93 0.26 0.28 0.51 0.00 2.48
2020 0.10 0.08 0.06 0.10 0.02 0.06 0.01 1.30 0.39 0.07 0.00 2.19
TOTALS 5.87 3.66 4.30 15.97 17.84 30.21 48.78 112.91 153.88 187.39 10.41 591.22
* Extended at least two months beyond the maturity date.
** At maturity. Includes loans extended 1 month.
Note: Excludes defeased loans.
Sources: Wells Fargo Securities, LLC, Intex Solutions, Inc., Trepp, LLC.

Future Maturities by Deal Vintage ($billion outstanding)


Large-Loan Floating Rate & Single Asset/Single Borrower Deals
Month 2002 2003 2004 2005 2006 2007 2008 TOTALS
Ext.* 0.00 0.00 0.00 0.05 0.03 2.03 0.00 2.11
Mat.** 0.00 0.00 0.26 0.15 1.29 1.81 1.44 4.95
2010 0.00 0.00 0.33 0.98 6.67 5.00 0.00 12.98
2011 0.00 0.12 0.13 1.27 7.80 14.09 0.00 23.41
2012 0.04 0.07 0.00 0.00 0.00 2.55 0.00 2.66
2013 0.00 0.19 0.00 0.00 0.00 0.00 0.00 0.19
2014 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2015 0.00 0.00 0.00 0.00 0.20 0.00 0.00 0.20
TOTALS 0.04 0.38 0.73 2.45 15.99 25.48 1.44 46.50
* Extended at least two months beyond the maturity date.
** At maturity. Includes loans extended 1 month.
Note: Excludes defeased loans.
Sources: Wells Fargo Securities, LLC, Intex Solutions, Inc., Trepp, LLC.

10
DISCLOSURE APPENDIX

Additional information is available on request.

This report was prepared by Wells Fargo Securities, LLC.

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SECURITIES: NOT FDIC-INSURED * NOT BANK-GUARANTEED * MAY LOSE VALUE


WELLS FARGO SECURITIES, LLC
FIXED INCOME RESEARCH

Diane Schumaker-Krieg, Managing Director, Global Head of Research & Economics diane.schumaker@wachovia.com (704) 715-8437
(212) 214-5070

Structured Products Research


Marielle Jan de Beur, Managing Director Head of Structured Products Research marielle.jandebeur@wachovia.com (212) 214-8047
CMBS and Real Estate Research (704) 715-8425
Glenn M. Schultz, CFA, Managing Director Head of Residential Mortgage Research glenn.schultz@wachovia.com (704) 383-4758
John McElravey, CFA, Director Head of Consumer ABS Research john.mcelravey@wachovia.com (704) 715-7615
Chris van Heerden, CFA, Director CMBS and Real Estate Research chris.vanheerden@wachovia.com (704) 715-8321
Lad Duncan, Vice President CMBS and Real Estate Research lad.duncan@wachovia.com (704) 715-7423
David Preston, CFA, Vice President CDO and Commercial ABS Research david.preston@wachovia.com (704) 715-7383
Randy Ahlgren, Associate Residential Mortgage Research randy.ahlgren@wachovia.com (704) 715-8889
Zachary L. Bolster, Associate ABS and CDO Research zachary.bolster@wachovia.com (704) 715-8382
Landon Frerich, Associate CMBS and Real Estate Research landon.frerich@wachovia.com (704) 715-8376
Bee Sim Koh, Associate Residential Mortgage Research beesim.koh@wachovia.com (704) 715-0536

Credit Research

Lee D. Brading, CFA, Managing Director Head of Credit Research lee.brading@wachovia.com (704) 383-6491
HY Homebuilding, Building Products, Industrials
Gail Golightly, Managing Director Associate Director of High Grade Research gail.golightly@wachovia.com (704) 383-4836
HG Insurance
Matthew H. Burnell, Managing Director HG U.S. Financial Institutions matt.burnell@wachovia.com (704) 374-7148
James P. Dunn, Jr., CFA, Managing Director HG Basic Industries, Building Products, Diversified
Manufacturing, Aerospace & Defense, Railroads jim.dunn1@wachovia.com (704) 715-8377
Dennis M. Farrell, Jr., Managing Director HY Gaming, Lodging and Leisure dennis.farrell@wachovia.com (704) 383-5037
Frank D. Henson, Jr., Managing Director HG Retail, Food & Beverage frank.henson@wachovia.com (704) 715-8466
Bryan C. Hunt, CFA, Managing Director HY Food & Beverage, Food Retailing, Restaurants bryan.hunt@wachovia.com (704) 383-0728
Grant Jordan, Managing Director HY Consumer Products, Retail, Technology grant.jordan@wachovia.com (704) 715-7022
S. Ross Payne, CFA, Managing Director HG Energy, Pipelines ross.payne@wachovia.com (704) 383-3619
Thierry Perrein, Managing Director HG Real Estate Investment Trusts thierry.perrein@wachovia.com (704) 715-8455
Nicole Black, Director HG Telecommunications, Media, Technology nicole.black@wachovia.com (704) 715-7382
Duncan Brown, Director HY Healthcare duncan.brown@wachovia.com (704) 715-8332
Bishop Cheen, Director HY Media/Entertainment/Telecom bishop.cheen@wachovia.com (704) 383-0473
Dan Forth, Director HG Credit Index Specialist daniel.forth@wachovia.com (704) 383-4097
Robert Hauff, Director HG Managed Care, Life Insurance rob.hauff1@wachovia.com (704) 374-4176
Kamal Patel, Director HG Utility & Power kamal.patel@wachovia.com (704) 715-8195
James Spicer, Director HY Energy james.spicer@wachovia.com (704) 715-8389
Kelly Burton, Vice President HY Homebuilding, Building Products, Industrials kelly.burton2@wachovia.com (704) 383-5599
Donovan Chaney, Vice President HY Aerospace & Defense,
Paper, Packaging & Forest Products donovan.chaney@wachovia.com (704) 383-4030
Jason Jones, Vice President HG Healthcare Real Estate Investment Trusts jason.jones2@wachovia.com (704) 715-7932
James Strecker, CFA, Vice President HG U.S. Specialty Finance james.strecker@wachovia.com (704) 715-0592
Erin K. Avery, CIMA, Associate HG Telecommunications, Media, Technology erin.avery@wachovia.com (704) 715-0590
Winifred Cisar, Associate HY Healthcare winifred.cisar@wachovia.com (704) 383-1967
Mike Ciulis, Associate HY Consumer Products, Retail, Technology michael.ciulis@wachovia.com (704) 715-8489
David Deterding, Associate HY Energy david.deterding@wachovia.com (704) 715-8418
Erica Gates, Associate HG Retail, Food & Beverage erica.gates@wachovia.com (704) 374-7026
Davis Hebert, CFA, Associate HY Media/Entertainment/Telecom davis.hebert@wachovia.com (704) 715-0594
Jerod Lenderman, CFA, Associate HG Utility & Power, Energy, Pipelines jerod.lenderman@wachovia.com (704) 715-1147
Kevin McClure, CPA, Associate HY Food & Beverage, Food Retailing, Restaurants kevin.mcclure1@wachovia.com (704) 715-7887
Alex Schneider, CFA, Associate HY Gaming, Lodging and Leisure alex.schneider@wachovia.com (704) 383-6384
Jeff Stewart, Associate HG Basic Industries, Building Products, Diversified
Manufacturing, Aerospace & Defense, Railroads jeffrey.stewart@wachovia.com (704) 715-4130