Commercial Mortgage Market Monitor September 2018

Monthly Commentary


The CMBS 2.0 delinquency rate decreased in September from 0.57% to 0.47% due to a combination of limited new delinquencies (numerator effect) and pay downs (denominator effect). The special servicing (SS) rate decreased from 1.29% to 1.12% with only six loans totaling $91MM transferring to SS.

There were 16 loans ($174MM) that became newly delinquent in September. One large, notable delinquency was $27.9MM Deer Springs Town Center (2.76% MSBAM 2013-C12). Deer Springs Town Center is secured by the fee simple interest in a 194,603 square foot anchored retail center located in North Las Vegas, NV. The property was built in 2009 and is managed by Stoltz Management, the operating platform of Stoltz Real Estate Partners, a private owner/operator of retail, office, industrial, and multifamily properties across the United States. As of June 2018, the property was 97.82% occupied with a net cash flow debt service coverage ratio (NCF DSCR) of 1.38x. Despite the strong recent performance, the largest tenant at the property, Toys ‘R’ Us (65,705 square feet, 33.8% net rentable area), filed for Chapter 11 bankruptcy on 9/18/2017. The borrower is delinquent for the August and September debt service payments. Stoltz is marketing the Toys ‘R’ Us space with a real estate broker. We’ve been told that a letter of intent is out to a national retailer with the hope that the sponsor can re-tenant the Toys ‘R’ Us space.

Two CMBS loans took losses in September. One loan, $7.4MM Gander Mountain (1.2% CFCRE 2016-C7) was liquidated at a loss severity of 40%. The loan was secured by a 2014 build, single tenant retail property located in Waco, TX. The asset was 100% occupied by the outdoor recreation products retailer, Gander Mountain. In March 2017, Gander Mountain filed for bankruptcy. The asset was subsequently transferred to special servicing and eventually REO status. The property was sold for $5.3MM which resulted in a loss to the trust of $3MM.

In new issue CMBS, seven private label deals ($4.5BN) priced, including three conduit deals ($3.2BN) and four single asset/single borrower (SASB) deals ($1.3BN). Two of the conduit transactions used a horizontal risk retention structure while the other deal exhibited a vertical risk retention structure. The LCF AAAs priced at a weighted average spread of swaps +80bps. The largest SASB transaction was a $375MM 3yr floater with two 1yr extension options. The loan proceeds were used to refinance a regional mall portfolio owned by Brookfield Property Group (formerly GGP). The deal utilized a horizontal risk retention structure.

Year-to-date private label issuance totals $66BN across 106 deals, in line with year-to-date 2017. Annualized issuance volume of $88BN is now in line with revised Wall Street projections of $90BN for 2018.

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