CMBS Week in Review: Cash Spreads Tighten; Year-Over-Year CMBS Financial Review

The S&P 500 fell 0.7%, the Dow Jones fell 0.8%, and the Nasdaq lost 0.7% on Friday as less than ideal consumer sentiment data was reported. All three indexes ended with weekly losses as news from the Fed and consumer sentiment reports were released. Fed Chairman Jerome Powell remarked that he believes the current inflation was 'transitory' as Americans' concerns over high inflation rose. Retail sales rose 0.6% last month, according to a report from the Commerce Department, but the slight uptick did little to offset investors' apprehension towards the future of the economy.

CMBS Market Update

The three largest BWIC listings for the week were between $78 million and $829 million (combined notional amount), according to data from Solve Advisors. Approximately 54% percent of the paper that went out for trading was backed by office properties in NY and CA and retail collateral in CA, NV, and TX properties.

CMBS cash spreads tightenedby as many as two basis points last week while CMBX 6-14 AAA spreads remain unchanged. CMBX BBB- spreads ranged from two basis points tighter to almost 25 basis points wider with CMBX 6 BBB- widening by 24 basis points.

Full Accounting of COVID-19 Crisis: CMBS Impact

While there has been much discussion on the broad-ranging effect the coronavirus pandemichas had on global economies within such a short period, commercial real estate market participants have been looking for meaningful data as a gauge of how much the pandemic had taken a toll on property financials in 2020. To assess the impact of the pandemic on CRE property performance, Trepp examined servicer remittance on 13,215 CMBS loans for which fiscal year-end financials for both 2019 and 2020 were provided. On average, overall NOI, revenue, and occupancy behind CMBS loans contracted by 10.3%, 6.9%, and 5.3%, respectively, between 2019 and 2020. Read the full year-over-year CRE financials report here.

CMBS Loan Losses from June 2021

Approximately $442.5 million across 20 loans were resolved with losses in June, carrying an average loss severity of 41.36%. The losses were concentrated around larger shopping centers and mall loans that resolved, with 77% of the loss total belonging to the retail sector. The 12-month average disposition balance rose to $273.1 million, while the 12-month moving average fell to 62.24% from 64.17% the month prior. See our list of the five largest CMBS loan losses from June.

The TreppWire Podcast

In the most recent episode of The TreppWire Podcast, we dive into our latest CMBS analysis of financial benchmarks like net operating income, revenue, and occupancy by commercial real estate property type to assess the impact of the pandemic. We also give a review of office maturity data, showing some significant tenant rollover, discuss Fed Chair Powell's latest inflation comments, Q2 2021 bank earnings, and this week's headlines and must-know news for the CRE market. Listen here.

New Conduit Issuance

Top Credit Stories from the Week

Trepp's Credit Stories are originally published in our daily client newsletter, TreppWire. If you are interested in seeing coverage of credit stories in your inbox every morning, clickhere.

Big Sole Tenant Behind Phoenix Office Loan to Vacate(CGCMT 2014-GC19)- According to servicer watchlist comments for the $10 million Asurion Building loan, the sole tenant is expected to vacate later this month. Watchlist comments indicate that a lease extension for 63 months had been reached last year. However, Asurion later changed course and opted not to renew.

Big Miami Office Loan Defeased (CGCMT 2012-GC8) -Back in May, we noted that the Townsend Group was selling its 90% stake in the Citigroup Center to Monarch Alternative Capital for $300 million. (The original reporting came from The Real Deal). This month's servicer data revealed that the 2012 loan on the property has been defeated. The property backed the $146.6 million Miami Center loan which is split between two 2012 CMBS deals.

Times Square Retail Loan Not Paid Off at Maturity(GSMS 2011-GC5) - July servicer data brought word that the $180 million 1551 Broadway loan was not paid off on its maturity date this month. The loan makes up 36.1% of the collateral behind GSMS 2011-GC5.The sole tenant is American Eagle with 25,600 square feet of space on a lease that ends in early 2024. The retail space covers three stories in essentially the middle of Times Square.

Buffalo Mall Sold For Less Than Most Recent Valuation(COMM 2014-CR14) - The collateral behind the $32.2 million McKinley Mallloan has been sold for $8.5 million to the Kohan Retail Investment Group. Spectrum Local Newsreported the story. This is a disappointing outcome for CMBS investors as the most recent valuation of the collateral was $11.51 million late last year. In an interesting twist, Benderson Development and the Town of Hamburg tried to stop the sale as Benderson said it would be willing to pay $10 million for the asset.
Value of Another Houston Hotel Cut (COMM2014-CR17) - Back in March, we noted that the borrower behind the (now) $23.1 million Crowne Plaza Houston River Oaks loan had requested deed-in-lieu (DIL). This month, according to servicer data, the value of the collateral was lowered. A few days ago, we noted that the value of the collateral behind the Sheraton North Houston loan was also cut. In that case, the new value remained above the loan balance, but that was not the case for the Crowne Plaza Houston River Oaks loan.

Originally published in TreppWire, which is distributed every morning as a client-only email newsletter. TreppWire enables readers to stay up-to-date on market activity while providing a competitive advantage over others. TreppWire leverages Trepp's market expertise and proprietary data sets to provide daily market commentary, trend analysis, research, and breaking news to its clients.

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

Public link

Please use the above public link if you want to share this noodl on another website.