Commercial Mortgage-Backed Securities Market Monitor

Commercial Mortgage Market Monitor April 2019

Monthly Commentary

Twenty four loans totaling $468MM became newly delinquent in April which increased the CMBS 2.0 delinquency rate to 0.93%. The special servicing (SS) rate increased to 1.62% with sixteen loans totaling $420MM newly transferred to SS.

One notable delinquency was the $21MM The Showcase at Indio loan (1.74% COMM 2014-UBS4). The loan is secured by the fee simple interest in a 157,540 SF retail center located in Indio, CA. The debt was paid through 2/1/2019 but subsequently transferred to the special servicer as the shadow anchor (Target) closed its store due to competition from a newly constructed Walmart store adjacent to the property. Junior anchor tenants include Ross, Marshall’s, Big Lots and Dollar Tree. Many tenants at the property have co-tenancy clauses for Target that allow them to pay percentage rents until the shadow anchor spaced is re-leased. We have been notified that an entity of the borrower has purchased the Target store box and is working to sub-divide the space and lease to new tenants.

The largest loss severity in April resulted from the liquidation of the $7MM Radisson Hotel – Baton Rouge (WFRBS 2014-C19). The loan was secured by a 132 room full service Radisson hotel in Baton Rouge, LA. The property was built in 1972 and most recently renovated in 2008. At origination, the loan was underwritten to a Net Operating Income (NOI) of $923,554. Since origination, expenses at the property came in higher than expected with contract labor costs cited as the main contributor to the substantial increase. Post foreclosure, the property was listed for sale; the asset was liquidated and resulted in a loss to the trust of $7.7MM (110% loss severity).

In new issue CMBS, seven private label deals ($2.8BN) priced, including two conduit deals ($1.6BN) and five single asset/single borrower (SASB) deals ($1.2BN). One conduit transaction utilized a vertical risk retention structure while the other deal used an L-shaped structure. The conduit AAA LCFs priced at weighted average spread of swaps + 86 bps.

The largest SASB transaction was a $325MM 2yr floater with three 1yr extension options collateralized by the borrower’s leasehold interest in the Hyatt Regency New Orleans, located on Loyola Avenue in New Orleans, Louisiana. The AAA class priced at a spread of 1mL + 105 bps.

2019 private label issuance across conduit/SASB totals $18.8BN across 35 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