Commercial Mortgage Market Monitor April 2018

Monthly Commentary


The CMBS 2.0 delinquency rate and special servicing rate increased modestly in April, to 0.46% and 0.99%, respectively.

One of the largest loans to newly enter special servicing was $45.5MM Hotel Felix Chicago (4.6% WFRBS 2013-C18), secured by a 225-room boutique hotel in downtown Chicago, IL. The loan carried a 1.00x debt service coverage ratio (DSCR) as of year-end, with heavy competition and a 3.5x increase in property taxes eroding profitability. The loan is now 60-days delinquent and the borrower has requested a modification.

There was one CMBS 2.0 liquidation during the month, $7.5MM Waterbury Crossing (0.6% JPMBB 2014-C21), secured by a 69,424 square foot (SF) two-tenant retail property in Waterbury, CT. The property’s largest tenant filed for bankruptcy in June 2016, reducing occupancy to 37%. In May 2017, the loan moved into special servicing as the borrower was unable to re-tenant the vacant space. In July 2017, the property received an updated appraisal which implied a 47% haircut to origination value, from $11.4MM ($164 PSF) to $6MM ($86 PSF). The loan was liquidated during the month at a 52% severity to the trust ($52 PSF recovery value).

In new issue CMBS, four private label deals ($2.8BN) priced, including three conduits ($2.4BN) and one Single Asset Single Borrower (SASB) transaction ($0.4BN). Two of the conduits used horizontal risk-retention structures with both LCF AAAs pricing at swaps +88bps. One conduit used a vertical risk-retention structure and the LCF AAAs priced at swaps +83bps. The only SASB deal issued was floating rate, with a two-year initial term and seven-year maximum term (five one-year extension options) secured by two adjacent office towers in San Francisco, CA; the AAAs priced at 77 DM.

Year-to-date private-label issuance totals $22BN, which annualizes to $66BN implied volume for 2018 – about 20% lower than 2017 issuance ($83.5BN) and 10-15% lower than Street projections (around $75BN).

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