Commercial Mortgage-Backed Securities Market Monitor

Commercial Mortgage Market Monitor August 2019

Monthly Commentary

September 11, 2019

Twenty seven loans totaling $366MM became newly delinquent in August which kept the CMBS 2.0 delinquency rate flat at 0.75%. The special servicing (SS) rate increased to 1.39% with twenty two loans totaling $445MM newly transferred to SS.

One notable delinquency was the $28.9MM Countrywood Crossing (3.8% of COMM 2013-LC13) loan. The loan is secured by the fee simple interest in a 233,981 square foot anchored retail facility located in Cordova, TN that was built in 2007. At the time of origination, occupancy was at 94% and Gordmans Inc represented 26% of the net rentable area (NRA) as the largest tenant. Gordmans Inc declared bankruptcy and vacated the premises in May of 2019. Subsequently, the most recent full year occupancy number came in at 68% and the net cash flow debt service coverage ratio has fallen to 0.91. A cash trap was initiated and the borrower has indicated to the master servicer that they will not be making up payment shortfalls.

The largest loss severity in August resulted from the liquidation of the $4.6MM Radcliff Square Shopping Center (COMM 2014-UBS3). The loan was secured by a neighborhood retail center totaling 97,070 square feet located in Radcliff, Hardin County, Kentucky. At the time of loan origination, the property was appraised at $6,900,000, 92% occupied, and generated $504,373 of net operating income. The largest tenant was Ollie’s Bargain Outlet (27% NRA) with another large discount retailer tenant being Family Dollar (9% NRA). The loan transferred to the special servicer in January 2017 due to delinquent payments and eventually a foreclosure sale occurred which resulted in a $2.4MM loss to the trust (53.3% loss severity).

In new issue CMBS, nine private label deals ($5.9BN) priced including four conduit deals ($3.9BN) and five single asset/single borrower (SASB) deals ($2BN). The conduit transactions utilized L-shaped and horizontal risk retention structures. The conduit AAA LCFs priced at a weighted average spread of swaps + 94 bps.

The largest SASB transaction was a $950MM 10yr fixed rate deal collateralized by the borrower’s leasehold interest in One Bryant Park, a high quality office building located in Midtown Manhattan. The AAA class priced at a spread of swaps + 100 bps.

2019 private label issuance across conduit/SASB totals $47.5BN across 75 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