Commercial Mortgage-Backed Securities Market Monitor

Commercial Mortgage Market Monitor October 2019

Monthly Commentary

Twenty-five loans totaling $551MM became newly delinquent in October, which increased the CMBS 2.0 delinquency rate to 0.82%. The special servicing (SS) rate decreased to 1.26% with twelve loans totaling $120MM newly transferred to SS.

One notable delinquency is the $39.85MM University Village (3.5% of COMM 2014-UBS6) loan. The loan is secured by the fee simple interest in a 1,164-unit student-housing complex located in Tuscaloosa, Alabama. The asset was built in 2006, renovated in 2009, and is located roughly 2.5 miles south of the main campus at the University of Alabama. At the time of origination, occupancy was at 94% and the net cash flow debt service coverage ratio (NCF DSCR) stood at 1.32x. The most recent financials for the first quarter of 2019 show that occupancy has dropped to 63%. The loan was transferred to special servicing in July of 2019 due to imminent default and is now thirty days delinquent. Similar to the $37.8MM Aspen Heights – Stillwater (3.6% of MSBAM 2014-C16) loan that we wrote about in last month’s commentary, we continue to see student housing in rural markets underperform.

The largest loan to take a significant loss in October was the $15MM Alpha Health Center (1.1% of WFRBS 2014-C22) loan. The loan was secured by the fee simple interest in a 91,301 square foot medical office property which was originally converted from a Walmart and located in Elkton, MD. Elkton is a secondary/tertiary market located roughly halfway between Baltimore and Philadelphia. In September 2018, occupancy at the asset dropped to 12% versus 91% at origination. After the large drop in occupancy, leasing efforts resulted in minimal potential tenant interest and the asset was put up for sale. The asset was eventually sold and the loan realized a $13.9MM loss to the trust (92.6% loss severity).

In new issue CMBS, twelve private label deals ($12.3BN) priced including four conduit deals ($3.7BN) and eight single asset/single borrower (SASB) deals ($8.6BN). The conduit AAA LCFs priced at a weighted average spread of swaps + 96 bps.

The largest SASB transaction was a $5.6BN 2yr/5yr floating rate deal priced for Blackstone. The proceeds were used to finance their purchase of a large industrial portfolio from Global Logistics Properties (GLP). The AAA class priced at 1mL + 110 bps.

2019 private label issuance across conduit/SASB totals $68.4BN across 99 transactions year to date. Agency CMBS issuance stands at $109.1BN across Freddie K and Fannie DUS 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