Commercial Mortgage-Backed Securities Market Monitor

Commercial Mortgage Market Monitor June 2019

Monthly Commentary


Twenty eight loans totaling $543MM became newly delinquent in June which increased the CMBS 2.0 delinquency rate to 0.74%. The special servicing (SS) rate increased slightly to 1.34% with sixteen loans totaling $221MM newly transferred to SS.

One notable delinquency was the $27MM Shopko Oregon Portfolio loan (2.6% JPMDB 2017-C5). The loan is secured by the fee simple interest in three Shopko retail stores (319,006 SF) located in Eugene, Salem, and Bend, Oregon. Reported occupancy is at 100% but Shopko, the sole tenant at all three assets, filed for Chapter 11 bankruptcy at the beginning of 2019. As part of the reorganization plan, Shopko will close more than 100 locations. All three of the stores are on the closure list. The borrower is exploring options in order to determine the best workout strategy going forward.

One large loss severity in June resulted from the liquidation of the $10.4MM Holiday Inn – Houma LA (WFRBS 2014-C19). The loan was secured by a 97 key full service Holiday Inn located in Houma, LA. The property was built in 2006 and most recently renovated in 2013. The Houma market is heavily dependent on off shore oil and gas production. Since hitting over $100 per barrel in 2014, the price of West Texas Intermediate crude has declined significantly and with that, oil companies have decreased travel and mandated price reductions from their hotel vendors. Subsequently, net cash flow at the hotel for 2018 was reported to be negative $161,311 versus $1,271,697 at the time of underwriting. Due to this significant decline in asset performance, the property was sold which resulted in an $8.2MM loss to the trust (79.5% loss severity).

In new issue CMBS, twelve private label deals ($7.5BN) priced including five conduit deals ($3.8BN) and seven single asset/single borrower (SASB) deals ($3.7BN). The conduit transactions utilized L-shaped and horizontal risk retention structures. The conduit AAA LCFs priced at a weighted average spread of swaps + 95 bps.

The largest SASB transaction was a $1BN 10yr fixed rate deal collateralized by the borrower’s fee simple interest in an approximately 1.46mm square foot office condo designated as the Time Warner Unit of the 30 Hudson Yards office building. The AAA class priced at a spread of swaps + 95 bps.

2019 private label issuance across conduit/SASB totals $37.9BN across 61 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