Trepp LLC

02/18/2020 | News release | Distributed by Public on 02/18/2020 15:22

CMBS Week in Review: Trio of Conduit Deals Hit the Market

The week of Valentine's Day brought word of a series of new (hopefully financially beneficial) partnerships that are currently underway in the corporate world, including one revealed last Monday about the federal court ruling which gave T-Mobile and Sprint the green light for their proposed merger. The other major consolidation headline had to do with Simon Property Group's plan to acquire fellow mall operator Taubman Centers for $3.6 million.

(You can access a list of CMBS loans sponsored by Taubman on our In the Spotlight page under the 'Taubman Realty CMBS Exposure' drop-down.) At a hearing last Tuesday, the Delaware bankruptcy court also expressed its approval of Simon Property Group and Brookfield's $81 million purchase bid to rescue Forever 21 out of bankruptcy.

In terms of US stocks, all three major indexes rose for the second straight week as falling bond yields took the brunt of the economic damage stemming from the coronavirus outbreak, which now has a reported 40,000 infected cases. Other noteworthy news includes oil prices recovering from a five-week decline, consumer spending coming in more upbeat than anticipated for January, and overall manufacturing activity appearing sluggish to start the year.

In light of the flurry of news about Sears' downsizing that has been flowing through various local media over the past few days, we created a compilation list of those that overlap with CMBS. Seeing as new closures have been dribbling out day by day, we suspect that the total count will continue to grow and we will be adding to our list as new names are known.

The full Sears exposure list can be accessed on our In the Spotlight page under the 'Sears Holdings Closures 02/20' drop-down option. Three new CMBS loans impacted by Sears closures have been brought to our attention since last Monday, all of which are linked to either CMBX 6 or CMBX 7. (Sears is listed as a non-collateral anchor for all three loans.) The largest is the $170 million loan backed by the Augusta Mall in August, GA (COMM 2013-CR15 & WFRBS 2013-C16) where Sears occupies 158,000 square feet per securitization documents.

Spreads for CMBS cash and CMBX went in opposite directions last week: recent vintage conduit spreads narrowed between four and nine basis points at the top to middle portions of the curve while BBB and below spreads widened by more than 14 basis points. For post-crisis CMBX, BBB- spreads moved out by up to five basis points for series 8 through 12. BBB- spreads for CMBX 6 and 7 continued to grind wider in the last few days, perhaps due to the continued spate of brick-and-mortar retail downsizing news that kept rolling in through the press mill (CMBX 6 & 7 are known to contain heavy mall exposure).

Less than $200 million was out for bid Monday through Thursday when IO and agency paper were excluded from the total. Data provided to us by Solve Advisors show the three largest BWIC lists that went out for trading were predominantly a mixture of agency and conduit CMBS 2.0/3.0 AAA IOs with a combined notional amount between $300 million and $600 million.

The $830.5 million MSC 2020-L4 and the $962.8 million WFCM 2020-C55 were the two newest conduit offerings that priced two Friday's ago - the AAA spread level for the two deals settled at S+ 82 and S+84, respectively.

The $1.2 billion CGCMT 2020-GC46 transaction, which priced last Thursday, had the AAA pegged at S+ 82. The AAA pricings for February conduit new issues thus far marked a modest widening relative to what the primary sector was seeing in January, mostly due to what can be perceived as a spillover effect from global coronavirus concerns and the recent rally in the Treasury market.

Recent Conduit Issuance

Top Credit Stories from the Week

2010 Mall Loan Heads to Special Servicer as Borrower Seeks Extension(GSMS 2010-C1)- According to February remittance data, the $64.4 million Burnsville Center Center loan was sent to special servicing ahead of its maturity date this July. First-time special servicer comments noted that the borrower has acknowledged 'the difficulty to continue to service the loan given the current economic conditions.'

Burlington Vacates NJ Retail Center - Loan to Special Servicing(CGCMT 2014-GC21) - First-time servicer watchlist notes in February for the $15.9 million Harbor Square loan reveal that the collateral's second-largest tenant, Burlington, vacated and the loan will be sent to special servicing. The collateral is a 344,823-square-foot retail center in Egg Harbor Township, NJ.

Special Servicing Likely for Houston Hotel Loan as Maturity Nears(MSBAM 2015-C22) - CRE Direct cited DBRS Morningstar's email alert which highlighted the maturity risk associated with the $43.3 million Hilton Houston Westchase loan. The report indicated that the borrower may not secure refinancing by the loan's maturity date next month and a transfer to special servicing is likely.

Legacy REO Mall Coming to Market(CSMC 2007-C5)- The final chapter on another block-sized legacy asset is close to being written. The REO Mesilla Valley Mall, a 583,617-square-foot shopping center in Las Cruces, NM, will be marked for sale, according to CREDirect.The special servicer for the CMBS trust, KeyCorp Real Estate Capital Markets, appointed NKF Capital Market's mall division to launch a sales campaign

Resolution of 2011 Retail Asset Near as REO Property Sold(WFRBS 2011-C4)- According to CREDirect,the REO Wausau Centerasset has recently been sold, which means a sizable loss for the WFRBS 2011-C4deal should be coming soon.The collateral is a 235,656-square-foot open-air mall in Wausau, WI.

Disclaimer: The information provided is based on information generally available to the public from sources believed to be reliable.