I was in Dallas to cover the annual shareholders meeting of Goldman Sachs. I thought I would take a detour from the plush surroundings of Goldman’s offices to a rather different locale; the site of one of the first – and largest – CMBS 2.0 loans to have defaulted. My cab driver eyed me nervously when I said I wanted to stop by this place in North Richland Hills (he later confessed that he thought I was planning to strike a drug deal in the parking lot).

Here’s the story:

The former headquarters of ATI Careers Training Center, in a rundown suburb of Fort Worth, Texas lies vacant. Where once hundreds of students flocked in the hope of learning a trade as a medical assistant, mechanic or massage therapist, tumbleweed blows – literally, in the case of its expansive car park.

But the abandoned property has another unenviable distinction: the mortgage on it was one of the first loans to default in a commercial mortgage-backed security (CMBS) that was packaged after the financial crisis.

CMBS are bundles of property loans secured on shopping malls, office buildings and apartment blocks, which are sold to investors seeking income. The market for them all but disappeared in 2009, as defaults became widespread, until it was revived four years ago through the creation of ostensibly safer structures dubbed “CMBS 2.0”.

However, while sales of new CMBS topped $106bn last year – the highest since the crisis – research from Fitch Ratings indicates that the first defaults in these second-generation vehicles are emerging.

The credit rating agency has identified nine loans worth a collective $75m that have defaulted after being bundled into CMBS created between 2010 and 2013.

You can read more here.

And a hat-tip to this gentleman for the title.