Commercial Mortgage-Backed Securities Market Monitor

Commercial Mortgage Market Monitor February 2019

Monthly Commentary

The CMBS 2.0 delinquency rate decreased in February from 0.66% to 0.59%. The special servicing (SS) rate decreased from 1.12% to 1.11% with five loans totaling $67MM newly transferred to SS.

There were 24 loans ($334MM) that became newly delinquent in February. One large, notable delinquency was the $34MM 735 Sixth Avenue loan (4.25% CGCMT 2013-GC15). The loan is secured by the fee simple interest in a 16,500 SF retail property located in New York, NY.

The loan was underwritten at 100% occupancy and a net cash flow debt service coverage ratio (NCF DSCR) of 1.43x. The two largest tenants at the property, David’s Bridal and T-Mobile, did not renew their leases which expired at the end of 2018. David’s Bridal occupied 10,800 SF of space (65.45% exposure), while T-Mobile occupied 2,500 SF of space (15.15% exposure). We expect vacancy to persist as the marginal renters for retail space in the area have primarily been quick service restaurant tenants and this property has a food restriction in place.

The largest loan that took a material loss in February was $6.9MM Sayles Place Apts (WFRBS 2014-C19). The loan was collateralized by a 61 unit garden style multi-family housing property in Washington D.C. The property was built in 1968 and renovated in 2010. At origination, there were twelve units that had Housing Assistance Payment (HAP) contracts in place. HAP contracts are used to provide Section 8 tenant-based assistance under the housing choice voucher program of the U.S Department of Housing and Urban Development (HUD). In March of 2017, the HAP contracts were cancelled and asset performance subsequently declined. A foreclosure sale closed on 1/31/2019. The property was liquidated and resulted in a loss to the trust of $1.4MM (21% loss severity).

In new issue CMBS, thirteen private label deals ($6.6BN) priced, including six conduit deals ($5BN) and seven single asset/single borrower (SASB) deals ($1.6BN). Four of the six conduit transactions utilized a horizontal risk retention structure while two deals used a vertical risk retention piece. The conduit AAA LCFs priced at a weighted average spread of swaps +96 bps.

The largest SASB transaction was a $336MM 2yr floater with five 1yr extension options collateralized by the leasehold interest in the Waikiki Beach Marriott Resort & Spa located directly across from Waikiki Beach in Honolulu, Hawaii. The loan proceeds were used by an affiliate of Atrium Holding Company, one of the largest private owners and operators of full-service hotels in the United States, to refinance the existing debt encumbering the asset.

2019 private label issuance across conduit/SASB totals $8.9BN across 16 transactions year to date.


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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