Posts Tagged ‘CMBS loans’

CMBS Poised for a Comeback

Wednesday, February 19th, 2014

CMBS was a $230 billion industry prior to the recession. Today, we live in an era of lowered expectations where every victory needs celebrating as we get back into gear. Take Chicago, where lenders originated and sold off $2.48 billion in loans on Chicago-area properties last year, more than double the $1.20 billion in 2012, according to Trepp LLC, a New York-based research firm. Nationally, CMBS lending rose 85 percent last year, to $82.23 billion. So, we are 35% of the way back. A big part of this rebound is that lenders have eased rates and LTVs. Last year, the average U.S. CMBS loan equaled 63.6 percent of the property’s value, up from 59.8 percent in 2007, according to Trepp.

Another signal of the rebounding bond market is that troubled loans have been getting worked out and traded. First, CWCapital Asset Management LLC put properties with $2.57 billion of unpaid loan balances up for sale. Now, Blackstone Group LP (BX), Starwood Capital Group LLC and CIM Group are all following suit. About 700 bidders registered interest in the auction, which includes foreclosed loans, according to Morgan Stanley. What’s happening is that special servicers, seeing the surge in property values, are unwinding holdings from the real-estate collapse. According to Green Street Advisors Inc., commercial property prices have rallied 71 percent from their 2009 low, surpassing 2007 highs in some areas.

Looking ahead, many experts predict that U.S. CMBS lending will top $100 billion this year. The Chicago area could surpass $3 billion in 2014.

CMBS Maturities Face Eventual Day of Reckoning

Monday, June 29th, 2009

Moody’s reiterated its February analysis of CMBS loans,  noting that the majority of 2006 – 2008 ratings of conduit/fusion and large-loan deals are still stable.  The ratings agency warns that the assumptions hold up “as long as conditions in the commercial real estate market and the general economy do not weaken.”

large_foreclosed-propertySince February, “property prices have continued their march downward,” the Moody’s report notes.  Moody’s envisages a peak-to-trough price slide of more than 30 percent, with cap rates trending higher over the next several quarters.

“Despite the grim prognosis for property values, it is important to repeat the point made in the February report announcing our ratings sweep:  that property value is primarily a concern at loan maturity.”  Because most CMBS loan maturities will occur five to six years from now, “the maturity profile of the universe of CMBS loans is relatively benign.”

If the markets remain as weak in 2016 or 2017 as they are now, obviously there would be negative rating implications for CMBS.