Commercial Mortgage-Backed Securities Market Monitor

Commercial Mortgage Market Monitor December 2018

Monthly Commentary

The CMBS 2.0 delinquency rate increased minimally in December from 0.57% to 0.58%. The special servicing (SS) rate increased from 1.17% to 1.28% with thirty loans totaling $653MM transferring to SS.

There were 22 loans ($292.5MM) that became newly delinquent in December. One large, notable delinquency was the $54MM West Ridge Mall & Plaza (5% COMM 2014-CR16). The loan is secured by the fee simple interest in a portion of a two-story super regional mall and a portion of an anchored retail center located in Topeka, Kansas.

The collateral for the West Ridge Mall & Plaza Loan is 482,602 total square feet which consists of 392,249 square feet at the West Ridge Mall property and 90,353 square feet at the West Ridge Plaza property. The West Ridge Mall is a super-regional mall with five anchor tenants at the time of loan origination, including Dillard’s, JC Penney, Furniture Mall of Kansas, Sears, and Burlington Coat Factory. The West Ridge Plaza is an anchored retail center with two anchor tenants at the time of loan origination including Target and Toys R Us.

Asset performance has declined since underwriting. Most recent reported occupancy sits at 85% versus 90% at the time of underwriting. The borrower (Washington Prime Group) was not able to make their November loan payment. The loan is in delinquency status due to imminent default.

There were no large CMBS loans that took material losses in December.

In new issue CMBS, seven private label deals ($5.1BN) priced, including five conduit deals ($4.2BN) and two single asset/single borrower (SASB) deals ($0.9BN). Four of the five conduit transactions utilized a horizontal risk retention structure while one deal used an L-shaped risk retention piece. The AAA LCFs priced at a weighted average spread of swaps +103 bps which is 10 bps wider versus the November weighted average.

The largest SASB transaction was a $597MM 2yr floater with five 1yr extension options collateralized by the Grande Lakes Resort in Orlando, Florida. The Grande Lakes Resort is a 1,580 room full service resort comprised of the 582 room Ritz-Carlton Grande Lakes Luxury Hotel and the 998 room JW Marriott Grande Lakes Luxury Hotel. The loan proceeds were used by GLO Hotel Owner LLC, a joint venture among funds managed by Elliott Management and Trinity Real Estate Investments, to acquire the resort. The AAA tranche priced at 1mL + 128 bps and the deal utilized a horizontal risk retention structure.

2018 private label issuance across conduit/SASB totaled $75.8BN across 119 deals, compared to $82BN of private label conduit/SASB issuance that priced across 116 deals in 2017.

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This material is for general information purposes only and does not constitute an offer to sell, or a solicitation of an offer to buy, any security. TCW, its officers, directors, employees or clients may have positions in securities or investments mentioned in this publication, which positions may change at any time, without notice. While the information and statistical data contained herein are based on sources believed to be reliable, we do not represent that it is accurate and should not be relied on as such or be the basis for an investment decision. The information contained herein may include preliminary information and/or "forward-looking statements." Due to numerous factors, actual events may differ substantially from those presented. TCW assumes no duty to update any forward-looking statements or opinions in this document. Any opinions expressed herein are current only as of the time made and are subject to change without notice. Past performance is no guarantee of future results. © 2019 TCW