CMBS News Updates: Spring 2019

CMBS and Conduit Loan News

In the first quarter of 2019, a variety of trends and events have impacted the state of CMBS and conduit financing in the United States. Looking back at the 2018 year, while overall commercial loan transaction volume was up, CMBS issuances fell approximately 12%, to just under $77 billion. Overall, CMBS delinquency rates rose slightly, and, experts believe that troubled retail properties, including shopping malls, may be in for additional trouble if they cannot find a lender willing to refinance their debt.

Study Shows Difference Between Bank and Non-Bank CMBS Delinquencies

A recent study indicated that non-bank CMBS lenders faced borrower delinquencies at nearly twice the rate than bank CMBS lenders. This may be the result of a variety of factors, but can most likely be attributed to more lenient underwriting by non-bank lenders. In particular, CMBS loans originated in 2016 and 2017 generally had higher LTVs and lower DSCRs than their counterparts in earlier years. The most common reason for default was building occupancy issues, however, borrower-related issues also played a role in a significant amount of delinquencies.

Large CMBS Deals Still Impact The Market in 2019

While there aren’t many $1 billion+ CMBS deals to report in recent months, there are still several large transactions worthy of note. The largest CMBS deal in Q1 2019 was a $1.17 billion SASB transaction involving a group of medical offices in Cambridge, Massachusetts. Another large single-borrower deal involved Retail Value Inc., which refinanced 25 shopping centers with a $900 million CMBS loan.

Other noteworthy deals include a 48-story office tower in San Francisco that was refinanced with a $755 million CMBS loan in March. Plus, in April, a large group of investors financed the majority of the $398 million purchase of the Hyatt Regency New Orleans with a sizable conduit loan.