Daily market intelligence on mortgages, equity raising, investment sales, and CMBS.

Tuesday, 26 March 2019

CMBS Defeasance Activity Skyrockets to $17.8Bln in 2018

Written by 
Rate this item
(0 votes)

Commercial Real Estate Direct Staff Report

The continued escalation in prices for apartment properties drove a 46 percent surge in defeasance volume last year, to $17.8 billion, according to Moody's Investors Service.

A total of $8.5 billion of that volume was comprised of Freddie Mac loans securitized through the agency's FREMF CMBS transactions. Those are all backed by multifamily properties.

The remaining $9.3 billion of volume was comprised of loans securitized through private-label conduit transactions. And nearly one-third of that - $3 billion - was comprised of multifamily loans.

Defeasance is the process through which property owners can retire their securitized mortgages, which generally are restricted from prepayment, before their maturity. It involves the replacement of a loan's collateral with government securities that mimic the loan's cash flow through the time it becomes open to prepayment.

Property owners generally turn to defeasance in order to take advantage of what might be substantially lower mortgage interest rates, or to tap the equity created by a run-up in values.

The latter has been the driver of much of the defeasance activity in recent years as overall property prices, as gauged by the Real Capital Analytics Commercial Property Pricing Index, are up 65 percent since the first quarter of 2013. Prices for apartment properties are 83 percent higher now. So, it's no surprise that 65 percent of the $17.8 billion of loans that were defeased last year were backed by apartment properties.

A total of $2.2 billion, or 12.3 percent of the total defeasance volume, involved loans against office properties. The CPPI pegs office values as being 58.1 percent higher than five years ago.

What's surprising, however, is that 40 percent of last year's defeasance volume involved loans with at least four years of term left. That was up from...





weekly-call-to-action

“The Weekly”

“The Weekly” is Commercial Real Estate Direct’s PDF newsletter, sent to subscribers every Friday morning. With over 100 news stories published on Commercial Real Estate Direct each week, “The Weekly” features the top stories in commercial real estate that industry participants need to know first. “The Weekly” also contains:

  • Breaking mortgage, CMBS, and REIT news

  • Quarterly league tables with rankings of B-piece buyers, book runners, and lenders

  • Industry moves and changes in “The Insider“

Additional Info

  • Syndicate to Realpoint: No
  • Subject: CMBS - non-deal specific (CMBS-G), Commercial MBS (CMBS), Defeasance (DEF)
  • Company: Moody's Investors Service
  • Private: Yes
Read 144 times

Data Digest

 

CMBS DELINQUENCY VOLUME

dqdataFP1

 

CMBS SPECIAL SERVICING VOLUME

sschartfp

Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44

 

RCA CPPI

 

cppichart FP

 

 

CMBS 2.0 Spreads

AAAspreads

Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41

 

 

 

REITCafe

  • Challenging Retail Environment Weights on REITs
    Mixed economic news is weighing on retail markets, pushing REIT performance down in 2015. This week, the National Retail Federation announced that back-to-school spending is expected to be down 9.3% in 2015. This news came on the heels of a report from the Commerce Department stating that retail sales declined 0.3%...
     
  • US REITs Feeling Effects from Turmoil in Greece and China
    International economic forces have taken center stage this week, affecting both US stock markets and REITs. The crash in the Chinese stock market and ongoing concerns about the future of Greece in the eurozone drove markets down during the first half of the week. REITs fared better than the overall market...

  • What Does Increased Construction Mean for Apartment REITs?
    REITs so far this year have raised $17.1 billion of capital through the sale of unsecured notes, bringing the total raised over the past two and a half years to just more than $75 billion. That’s more than they raised during the previous five years. The massive volume shouldn’t be a surprise as it comes while the yield from 10-year Treasury bonds, the benchmark...
shouldn’t be a surprise as it comes while the yield from 10-year Treasury bonds, the benchmark against which most REIT’s price their bonds
warehouse-backstage