Waves of CMBS downgrades are following in the wake of Moody's Investors Service's review of large loan and single borrower U.S. CMBS ratings, in which the rating agency found the current economic recession is hurting cash flows and likely to lead to a marked increase in term defaults.

"Due to the current economic recession, Moody's expects a significant overall decline in future property cash flows as a result of a higher incidence of tenant defaults and bankruptcies and a sharp decline in lease renewal rates," the rating agency said. "This drop in cash flows is likely to lead to a marked increase in term defaults on commercial mortgage loans particularly for those loans that were underwritten with significant upside at a peak point in the real estate cycle and valued using historically low capitalization rates."

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