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NEW YORK CITY-Standard & Poors Rating Services has recorded its lowest quarterly level of downgrades since the fourth quarter of 2001. A company report says investors and lenders alike are flooding the CMBS marketplace with cash earmarked for real estate investments. The firm also expects US CMBS issuance volume to reach a new record in 2005, due to low interest rates, high liquidity and strong underlying real estate fundamentals.

"To achieve real estate portfolio allocation targets and desired returns, investors are funneling capital into performing as well as underperforming and speculative properties," explains S&P credit analyst Roy Chun "As a result, loans collateralized by less than stellar properties are being aggressively refinanced, mitigating negative rating actions.

"We see it happening in strong stable markets like New York and Southern California where investors feel comfortable purchasing at low cap rates," Chun continues. "Or in places like New York where investors see potential value in converting office into condos."