<div id="readability-page-1"><div>Fitch Ratings-London-17 December 2025: EMEA CMBS lending standards are bifurcating as new sponsors enter the market, Fitch Ratings says. One cohort of recent single borrower CMBS has reintroduced robust lender protections, notably day-one financial covenants that create technical events of default around early signs of deterioration. In contrast, another cohort features wider options for borrowers to carry out disposals and weaker cash controls, increasing risks to noteholders late in the property cycle.Fitch has applied one-notch rating uplifts to select covenanted single-borrower transactions in 2025 —Taurus 2025-1 EU, Taurus 2025-4 UK and Lagarino (European Loan Conduit No. 40) — reflecting our view that financial covenants trim exposure to value declines associated with our rating assumptions.Industrial property portfolios remain central to EMEA issuance. E-commerce expansion and supply-chain reconfiguration have driven strong rental growth in this sector since the pandemic. We believe these post-pandemic adaptations will prove durable, and Fitch gives up to three notches’ rating uplift from model-implied results where loan structures can capture their benefits and absorb property market cycle risk (which is modelled as rental value decline assumptions).However, we do not believe the secular shifts in industrial property demand are a substitute for strong creditor protections in a downturn. European industrial property markets are showing signs of softening demand, with some submarkets posting falls in rental value.Meanwhile, there is a notable drift among non-covenanted industrial CMBS towards weaker loan features that heighten the risk of adverse selection eroding collateral quality. These features include diluted cash-trap mechanics as well as zero release premiums on the first 10% of disposals, enabling asset sales without de-leveraging and incentivising early release of higher-quality properties. This can encourage portfolio window-dressing.Other examples of weaker creditor protection are allocated loan amounts (ALAs) that are divisible pro rata by lettable area rather than market value. Where multiple properties of varying quality share a single ALA, divisibility by area expands the scope for adverse selection. In more homogenous trading estates, binding units together as a single collateral property can be creditor-friendly when demand is strong. But if local occupancy weakens and partial disposals are permitted, borrowers can apply capex selectively and shepherd better-let units out of the security net. This concentrates vacancy risk for noteholders.Fitch’s CMBS analysis is calibrated to differentiate these structures. Where weaker disposal rules expand optionality to enable borrowers to defend equity returns in a downturn, our disposal stresses are automatically more stringent. However, not all scenarios can be modelled. We therefore also curb the credit for the industrial sector’s secular post-pandemic demand drivers given to weaker loans that provide borrowers with new, less predictable ways to exploit information asymmetries in managing collateral properties in a downturn.The most recent crop of EMEA industrial property CMBS are printing more aggressive capital structures. When quoted against aggregate property open market value – rather than a property company valuation boosted by a portfolio premium and an assumed saving of property transaction tax – notes with advance rates of above 40% are rated ‘AAA’ despite the underlying weaker loan structure. In such cases, we believe the interplay of peaking rents and flexible disposal rules warrants heightened investor attention. This is especially so where higher advance rates justified by day-one property granularity may be vulnerable to disposal risk, baking in greater rating volatility from the outset.Contacts:Euan GatfieldManaging Director, Structured Finance+44 20 3530 1157euan.gatfield@fitchratings.comFitch Ratings30 North ColonnadeCanary WharfLondon E14 5GNVarun SugathenDirector, Structured Finance+44 20 3530 1719varun.sugathen@fitchratings.comMark BrownSenior Director, RiskCredit Commentary and Research+44 20 3530 1588mark.brown@fitchratings.comMedia Relations: Athos Larkou, London, Tel: +44 20 3530 1549, Email: athos.larkou@thefitchgroup.comThe above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.All Fitch Ratings (Fitch) credit ratings are subject to certain limitations and disclaimers. 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CMBS

Fitch Ratings reports a split in EMEA CMBS lending standards, with some transactions reintroducing strong lender protections and others offering more disposal flexibility, increasing risks. Industrial property portfolios remain key, driven by e-commerce growth. However, weaker loan features in non-covenanted CMBS heighten risks. Fitch applies rating uplifts to certain transactions with robust covenants, while cautioning on aggressive capital structures in recent CMBS issues. The analysis highlights the need for strong creditor protections amid softening industrial property demand.

Fitch Ratings: EMEA CMBS Sees Split Between Covenant Discipline and Disposal Flexibility