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Tuesday, 26 March 2019

CMBS Defeasance Activity Skyrockets to $17.8Bln in 2018

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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...


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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
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Data Digest







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




cppichart FP



CMBS 2.0 Spreads


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





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