Commercial Real Estate Direct Staff Report

Domestic, private-label CMBS issuance totaled $17.6 billion during the third quarter, bringing issuance for the year to just more than $58 billion.

That's nearly 4 percent shy of the $60.4 billion that had been issued to this point last year, which benefited from a robust $26.3 billion of issuance during the third quarter - a third again as much as this year's third quarter. Total issuance for all of last year was $86.4 billion - a level unlikely to be reached this year. Quarterly issuance this year has averaged only $19.3 billion, down from last year's $21.6 billion. If volumes don't change appreciably, the year could see roughly $77 billion to $80 billion of issuance.

That volume doesn't include collateralized loan obligations. A total of 20 such deals totaling $10.1 billion have priced so far this year.

The buzz is that perhaps a dozen more single-borrower transactions will be brought to market, along with perhaps six or so conduit transactions before the year is up.

During the third quarter and so far this year, the dollar volume of conduits and single-borrower transactions has been almost evenly mixed. But so far this year, more than twice as many single-borrower deals have priced than have conduits.

Meanwhile, conduit issuance is down 13 percent from last year's levels.

The average size of the 64 single-borrower deals that have priced so far this year has been $454.64 million. That compares with last year's $562.93 million average. Conduit transactions also have shrunk in average size, to $923.1 million from $952.74 million.

The conduit business, meanwhile, just isn't as profitable as it was last year. The weighted average profit margin for conduit deals that priced this year and had either a horizontal or vertical risk-retention structure was 1.2 percent. The comparable margin for deals that priced last year through September was 3.82 percent.

At the same time, credit underwriting remains relatively conservative, with the average loan-to-value ratio at 59.9 percent, according to Wells Fargo Securities. That's up only slightly from last year's 59.9 percent and compares with a post-crisis high of 65.8 percent for conduits issued in 2014. Debt-service coverage, meanwhile, averaged 1.98x this year, compared with 2.05x last year. But the percentage of loans, by balance, that don't amortize during their lives, has increased to 51.7 percent from last year's 46.6 percent, Wells Fargo found.

JPMorgan Securities remains the most-active CMBS bookrunner. It received credit for just more than 16 deals totaling $9.7 billion, for a 16.8 percent share of the overall market. Its market share was down slightly from the 17.2 percent share it held at the half. Well behind it is Deutsche Bank, with credit for 11.4 deals totaling $7.9 billion and a 13.7 percent market share, and Goldman Sachs, with 11.9 deals totaling $6.5 billion for an 11.2 percent share of the market.

Commercial Real Estate Direct divvies up bookrunner credit proportionally among all of a deal's bookrunners, based on what's stipulated in offering materials.

Comments? E-mail Orest Mandzy, or call him at (267) 327-4281.

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