Commercial Mortgage-Backed Securities Market Monitor

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).

Media Attachments

Legal Disclosures

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