All of the four major rating agencies have global operations, but only recently have they begun to focus more attention on the emergence of foreign commercial mortgage-backed issues. The CMBS concept was created in the United States, but it is now quickly spreading to Europe and Japan, in particular. This emergence certainly expands the overall market pie for the agencies, and the first into these emerging markets could reap tidy rewards.

Moody's, for example, recently rated the largest Japanese commercial real estate-backed transaction and issued a report on the future of UK property companies.

The firm assigned an Aa1 rating to JPY 41 billion of notes issued by New Shopping Centres Funding Corp., a special-purpose company incorporated in the Cayman Islands. The notes are backed by properties in Hokkaido, Greater Tokyo, Greater Osaka and Shikoku area and are operated as General Merchandising Stores under the brand of "Saty" or "Vivre."

Recently Moody's analysts David Major and Eric de Bodard in London shined their light on the UK property market for the first time, issuing a warning regarding the country's top public property companies.

According to the report, the top five UK diversified property companies - Land Securities (rated A1), British Land (not rated), MEPC (Baa1), Hammerson (Baa1) and Slough Estates (not rated) - account for around half the sector's capitalization.

Analyst David Major observes, "Despite the cyclical nature of the property sector, the largest UK quoted property companies continue to demonstrate conservative lease structures, well focused development programs and growth strategies, increasingly active management of their property portfolios, manageable debt levels and generally conservative financial policies."

Going forward, however, "pressure could increase, as competition M&A, shareholder pressure to maximize returns and an increased focus on property development motivate companies to adopt a somewhat more aggressive posture - including the issuance of more capital markets debt."

Actually that last bit sounds familiar, since Moody's has issued warnings relative to U.S. REITs taking on more debt by leveraging up. (See a related column by Moody's analyst Jay Siegel on page 34.)

For more information regarding each of the four CMBS analysts and their firms mentioned in this story, along with their methodologies and recent rating actions, you can contact them at the following:

Duff & Phelps Heidi Silverberg

New York

(212) 908-0233

Fitch IBCA Janet Price

New York

(212) 908-0527

Moody's Investors Service Tadd Philipp

New York

(212) 553-0376

Standard & Poor's Gale Scott

New York

(212) 438-2452