Commercial Mortgage Market Monitor July 2017

Fixed Income Commentary


The legacy CMBS delinquency rate and special servicing rate ended June at 39.0% and 46.0%, respectively, as pay downs and liquidations reduced the outstanding universe of legacy loans to $50.9BN (denominator effect) and a larger proportion of 2006-2007 loans outstanding are secured by underperforming and/or overleveraged properties (adverse selection).

Reviewing the refinance success rate for loans scheduled to mature in 2017, the success rate totaled 66% as of July – up from 64% as of June – but still consistently lower than the 72% success rate in 2016 and 79% rate in 2015. Turning to liquidation activity, July saw $1.4BN in liquidations across 94 loans, with more than 66% of the balance made up of 2006-vintage loans. The average loss severity excluding nonmaterial losses (defined as less than 2.0% loss) was 59%, up from 49% in June.

In CMBS 2.0, the delinquency rate and special servicing rate remained modest at 0.29% and 0.55%, respectively. In new issue, July was another busy month with $7.6BN in private-label pricing across 15 deals, resulting in year-to-date issuance of $42.1BN. In conduit, four deals ($3.6BN) priced, with execution on the LCF AAA’s ranging from swaps +88-91bps and execution on the BBB-‘s ranging from swaps +345-375bps. Risk retention structures included horizontal, vertical, and L-shaped solutions.

In Single Asset Single Borrower (SASB), 11 deals ($4.1BN) priced, consisting of five fixed-rate and six floating-rate transactions. Only one deal carried a 10-year term, backed by a Manhattan mixed used property, with the AAA’s pricing at swaps +98bps. The SASB risk retention structures varied between horizontal and vertical solutions. Of note, over 90% of the SASB issuance year-to-date represents refinancing – up from 67% in 2016.

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. © 2018 TCW