Commercial Mortgage-Backed Securities Market Monitor

Commercial Mortgage Market Monitor November 2018

Monthly Commentary

The CMBS 2.0 delinquency rate increased slightly in November from 0.56% to 0.57%. The special servicing (SS) rate increased from 1.14% to 1.17% with fifteen loans totaling $158MM transferring to SS.

There were 23 loans ($269MM) that became newly delinquent in November. One large, notable delinquency was the $50.6MM Aspen Heights – Columbia loan (4.1% MSBAM 2014-C14). The loan is secured by the fee simple interest in the Aspen Heights – Columbia property; a 318 apartment student housing complex with 972 bedrooms in 204 two-story buildings located in Columbia, Missouri. The asset is approximately 3 miles southeast of the University of Missouri – Columbia. The University of Missouri – Columbia is the state’s largest public research university with approximately 30,870 students. The asset was underwritten at a 94% occupancy rate and a 1.57x net cash flow debt service coverage ratio (NCF DSCR). Most recent financials show the asset as 76% occupied and a NCF DSCR of 0.81x. A default letter for payment default was sent to the borrower.

Two CMBS loans took material losses in November. One of the loans was collateralized by a large suburban office project in Danbury, CT. The loan, $58.6MM Matrix Corporate Center (8.9% MSBAM 2013-C11) was liquidated at a loss severity of 78.7%. The loan was secured by the fee simple interest in Matrix Corporate Center, a 1,046,701 square foot suburban office building. At origination, the asset was 72.1% occupied by 27 tenants. The largest tenant, Boehringer Ingelheim occupied 31.3% of the net rentable area and was responsible for approximately 46% of the underwritten base rent. A portion of the collateral was liquidated when Boehringer Ingelheim decided to terminate their lease and pay an $18.5MM fee associated with the termination. After a period of declining performance, the asset was placed in REO status and eventually sold. The REO sale closed on 10/17/2018 for $17.8MM; the asset was just 18% leased at the time of sale.

In new issue CMBS, nine private label deals ($6.1BN) priced, including five conduit deals ($4.4BN) and four single asset/single borrower (SASB) deals ($1.7BN). All forms of risk retention were utilized across the five conduit deals; horizontal, vertical, and L-shaped. The AAA LCFs priced at a weighted average spread of swaps +93 bps which is 7 bps wider versus the October weighted average.

The largest SASB transaction was an $850MM 2yr floater with three 1yr extension options collateralized by the Fontainebleau luxury resort in Miami Beach, Florida. The loan proceeds were used by Turnberry Associates to refinance existing debt on the asset. The AAA tranche priced at 1mL +95 bps; the deal utilized a horizontal risk retention structure.

Year-to-date private label issuance across conduit/SASB totals $70.7BN across 112 deals, compared to $75.9BN of private label conduit/SASB issuance that priced over the same period in 2017. Annualized private label issuance volume currently stands at $77BN.

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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