Commercial Mortgage-Backed Securities Market Monitor

Commercial Mortgage Market Monitor May 2019

Monthly Commentary

Twenty two loans totaling $392MM became newly delinquent in May which increased the CMBS 2.0 delinquency rate to 0.74%. The special servicing (SS) rate increased to 1.32% with sixteen loans totaling $208MM newly transferred to SS.

One notable delinquency was the $62MM Outlets of Mississippi loan (5.6% MSBAM 2014-C16). The loan is secured by the fee simple interest in a 300,156 SF outlet mall located in Pearl, MS. Reported occupancy is at 91% but the asset has experienced a severe decline in net operating income (NOI) as a number of tenants are paying rent as a percentage of sales. Full year 2018 NOI was reported at $3.15MM versus underwritten NOI of $6.15MM. The lender is discussing possible workout alternatives with the borrower as the loan is expected to eventually default due to cash flow issues.

One large loss severity in May resulted from the liquidation of the $13MM Turnpike Mall (JPMCC 2011-C3). The loan was secured by a 207,799 SF regional mall located in Augusta, Maine. The property was built in 1967 and most recently renovated in 2006. The largest tenant, Sears (37% of net rentable area), vacated the property in March 2017 and NOI subsequently declined significantly. The property was listed for sale via appointed receiver; the asset was liquidated and resulted in a loss to the trust of $11.1MM (85.5% loss severity).

In new issue CMBS, fourteen private label deals ($10.7BN) priced including four conduit deals ($3.8BN) and ten single asset/single borrower (SASB) deals ($6.9BN). The conduit transactions utilized vertical, L-shaped, and horizontal risk retention structures. The conduit AAA LCFs priced at a weighted average spread of swaps + 85 bps.

The largest SASB transaction was a $2.35BN 2yr floater with three 1yr extension options collateralized by the borrower’s fee (63) and leasehold (1) interests in 64 temperature-controlled warehouse and distribution facilities. The transaction was executed in order for Lineage Logistics to refinance a portion of their existing portfolio and provide financing for the acquisition of assets previously owned by Preferred Freezer Services. The AAA class priced at a spread of 1mL + 98 bps.

2019 private label issuance across conduit/SASB totals $29.6BN across 49 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