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

Wednesday, 05 July 2017

Private-Label CMBS Issuance Picks Up in June, Pushes 1H Volume to $34.1Bln

A total of $21.5 billion of CMBS deals priced during the second quarter, marking a dramatic turnaround from the first, when only $12.6 billion of deals priced. June alone saw $9.8 billion of issuance, propelling total volume for the first half to $34.1 billion, up 25 percent from last year. Goldman Sachs, meanwhile, was the sector's top bookrunner, with a 16.4 percent market share.

Commercial Real Estate Direct Staff Report

A total of $21.5 billion of CMBS deals priced during the second quarter, marking a dramatic turnaround from the first, when only $12.6 billion of deals priced.

The relatively healthy volume of deals during the latest period brings issuance for the year to $34.1 billion - a 25 percent increase from last year's first half, when volatile market conditions pushed many lenders and issuers to the sidelines.

Domestic CMBS Issuance

1H2017

1H2016

Deal Type

#Deals

Bal $mln

#Deals

Bal $mln

Conduit

22

20,662.06

22

18,499.23

Single-borrower

22

12,119.35

13

6,986.00

Floater

1

342.37

1

337.00

NPL

1

208.50

0

0

Seasoned

0

0

1

265.57

Other

1

758.77

2

757.86

TOTAL

47

34,091.05

41

27,307.66

Market conditions so far this year have been far more favorable than last year's first half. But issuers had to contend with the thorny issue that's risk retention. The rule, part of the Dodd-Frank Wall Street Reform and Consumer Act that was signed into law in 2010, requires that issuers retain a 5 percent vertical piece of every securitization, or sell a 5 percent subordinate piece, by market value to a B-piece buyer. Or, they can combine the two, keeping a slice and selling a piece.

As a result of the rule, which went into effect late last year, issuance this year got off to a slow start. After all, lenders were unsure how to profitably price loans. January saw only two deals price. But with market conditions extremely stable - conduit spreads, with a small number of exceptions, have remained in a relatively tight band during the first half - it became easier for securitized lenders to price loans. With two exceptions, benchmark bonds - those with the highest ratings and 10-year average lives - priced this year in a band between 88 and 98 basis points more than swaps. Similar bonds priced during the same period last year in a band between 110 and 173 bps more than swaps.

Meanwhile, issuance has increased every month except for April. June, for instance, saw $9.8 billion of deals. In contrast, issuance a year ago was less than $1 billion.

The buzz is that issuance this month ought to remain healthy as well, with estimates of nearly $11 billion slated to hit the market. Meanwhile, analysts generally are keeping with their forecasts for issuance of perhaps $65 billion to $80 billion for the full year, which compares with last year's $68.1 billion. Some very optimistic forecasts call for $100 billion or so of issuance.

The growth in issuance has been driven by single-borrower transactions, which ballooned by more than 70 percent to $12.1 billion, thanks to a substantially tighter market. The most senior bonds, with average lives of 10 years or so, this year were being sold at prices that resulted in yields of 115 to 145 bps more than swaps, depending on the collateral. That represents a contraction of 20-40 bps from last year. So it's no surprise that issuance increased. Issuers were able to profitably and aggressively price their loans.

Top Bookrunners
Private-Label CMBS

1H2017

1H2016

Investment Bank

#Deals

Bal $mln

Mkt
Shr%

#Deals

Bal $mln

Mkt
Shr%

Goldman Sachs

7.45

5,596.07

16.44

4.60

3,745.04

13.71

Wells Fargo Securities

5.43

4,596.11

13.50

6.10

4,088.48

14.97

Deutsche Bank

5.12

4,289.76

12.60

4.78

3,616.63

13.24

Citigroup

4.70

3,909.87

11.49

4.60

3,610.38

13.22

JPMorgan Securities

4.90

3,758.29

11.04

4.38

2,515.80

9.21

Morgan Stanley

4.42

3,533.37

10.38

2.59

1,611.75

5.90

BofA Merrill Lynch

3.71

2,084.60

6.12

3.48

1,604.84

5.88

Barclays Capital

2.31

1,898.90

5.58

1.60

890.93

3.26

Credit Suisse

4.26

1,854.94

5.45

3.00

2,173.89

7.96

UBS

1.45

1,037.33

3.05

1.30

982.03

3.60

Natixis

2.04

728.22

2.14

0.50

125.80

0.46

Cantor Fitzgerald

0.85

549.25

1.61

2.55

1,659.04

6.08

Societe Generale

0.46

304.33

0.75

1.528

683.04

2.50

TOTALS

47

34,091.05

 

41

27,307.66

 

Goldman Sachs was the most-active bookrunner during the half, receiving credit for 7.45 deals totaling $5.6 billion. Its volume was bolstered by the eight single-borrower deals it managed, three of them single-handedly. It also issued a conduit deal for which it was the sole loan contributor.

Wells Fargo Securities, which during last year's first half held the top spot in the bookrunner ranking, dropped one spot. It received credit for 5.4 deals totaling $4.6 billion. Deutsche Bank held on to its third-place spot, receiving bookrunner credit for 5.1 deals totaling $4.3 billion. The five most-active bookrunners, which include Citigroup and JPMorgan Securities, were responsible for 65 percent of the private-label CMBS issuance this year through June.

Comments? E-mail Orest Mandzy, or call him at (267) 247-0112, Ext. 211.





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Data Digest

 

CMBS DELINQUENCY VOLUME

dqdataFP1

 

CMBS SPECIAL SERVICING VOLUME

sschartfp

Top Bookrunners Domestic, Private-Label CMBS - 2016
Investment Bank #Deals Vol$mln MktShr%
JPMorgan Securities 14.94 10,350.16 15.14
Deutsche Bank 14.21 9,926.60 14.52
Wells Fargo Securities 13.36 9,513.96 13.92
Citigroup 10.87 8,061.79 11.80
Goldman Sachs 10.05 7,563.72 11.07

 

MOODY'S/RCA CPPI

 

cppichart FP

 

 

CMBS 2.0 Spreads

AAAspreads

Top CMBS Loan Contributors - 2016
Lender #Loans Vol$mln MktShr%
JPMorgan Chase Bank 133.67 8,670.33 13.34
Goldman Sachs 156.20 7,418.37 11.41
Deutsche Bank 178.17 6,510.75 10.02
Citigroup 184.41 5,512.20 8.48
Morgan Stanley 113.18 4,130.53 6.35

 

 

 

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