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Monday, 01 April 2019

Private-Label CMBS Issuance in 1Q Drops 15 Percent from Last Year

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Commercial Real Estate Direct Staff Report

Private-label CMBS issuance during the first quarter totaled $16.5 billion, down 15 percent from the $19.4 billion issued during the same period a year ago.

The decline was driven in large part by expectations, early in the year, that interest rates would be on the increase. That made lenders reluctant to aggressively write loans and bond investors hesitant to pay up for bonds.

Indeed, late last year, as rates climbed, bond investors shunned CMBS. That drove spreads on benchmark bonds - those with the highest possible ratings and 10-year average lives - into triple digits. Investors' reluctance to buy bonds led to hesitation among CMBS lenders to lend. Because it often takes a little while to get origination machines back in gear, securitization activity early this year was relatively weak.

January, for instance, saw three transactions, each a single-borrower deal. The first conduits took place in early February.

At that point, lenders were writing loans anticipating higher interest rates. But they declined, which has led to some of the best conduit profitability in memory. One conduit transaction, for instance, generated its loan contributors a profit margin of 4.24 percent. Every one of the five conduit transactions that have reported profitability has had a margin of 3.35 percent or better. The best margin last year, in contrast, was 2.53 percent.

Even though conduit issuance was down roughly 9.5 percent from last year, it still accounted for more than half of the issuance so far this year. That very well could be because issuers are more regularly slicing large loans into pieces and including them in the collateral pools of conduit deals. Competition for large loans appears to be extremely brisk.

Domestic, Private-Label CMBS Issuance

 

1Q2019

1Q2018

 

#Deals

Vol $mln

MktShr

#Deals

Vol $mln

MktShr

Conduits

10

8,698.94

52.60%

9

9,610.11

49.56%

Single-borrower

18

7,438.30

44.98%

21

9,615.05

49.59%

Other

1

399.20

2.42%

1

164.96

0.85%

TOTAL

29

16,536.44

 

31

19,401.12

 

Source: Commercial Real Estate Direct

Since 2007, every year's first-quarter issuance volume has averaged 25.2 percent of the full year's volume. But there were two outliers. In 2008, as the market's downturn accelerated, the first quarter accounted for a whopping 49 percent of the year's anemic volume. And in 2017, the quarter's volume amounted to only 14.5 percent - largely the result of then newly imposed risk-retention rules - of the year's issuance.

While it's still early, predictions that this year's volume would decline by 10 percent or more appear to be on track.

Top Bookrunners

Domestic, Private-Label CMBS

 

 

1Q2019

1Q2018

Rank

Investment Bank

#Deals

Bal $mln

MktShr

#Deals

Bal $mln

MktShr

1

Citigroup

4.14

2,566.22

15.52%

3.33

2,297.85

11.84%

2

Morgan Stanley

3.38

2,208.31

13.35%

1.13

1,036.23

5.34%

3

JPMorgan Securities

2.70

1,932.39

11.69%

5.37

3,432.14

17.69%

4

Credit Suisse

2.42

1,555.81

9.41%

1.03

810.00

4.18%

5

BofA Merrill Lynch

2.73

1,459.02

8.82%

0.44

514.73

2.65%

6

Goldman Sachs

2.50

1,457.71

8.82%

3.33

2,063.43

10.64%

7

Deutsche Bank

1.93

1,401.27

8.47%

2.50

2,741.50

14.13%

8

Wells Fargo Securities

2.00

1,359.85

8.22%

2.50

1,504.04

7.75%

9

Barclays Capital

2.01

972.65

5.88%

1.81

1,395.00

7.19%

10

UBS

1.10

690.35

4.17%

2.25

1,478.24

7.62%

11

Societe Generale

1.18

335.94

2.03%

0.60

670.79

3.46%

12

Cantor Fitzgerald

1.16

287.42

1.74%

1.29

464.21

2.39%

13

Natixis

1.00

199.00

1.20%

6.41

992.95

5.12%

14

KeyCorp

0.75

110.50

0.67%

0.00

0.00

0.00%

 

TOTAL

29

16,536.44

 

31

19,401.12

 

Source: Commercial Real Estate Direct

Citigroup was the most-active contributor of loans to CMBS deals during the first quarter, with 74.3 loans totaling $2.9 billion. That helped propel it to the top spot among bookrunners, with a 15.5 percent share of the market. That ranking divvies credit up among every deal's bookrunners, based on what's spelled out in offering memoranda.

A separate ranking that gives full credit to every manager on a deal had Academy Securities in its top spot. It was manager on nine deals totaling $7.1 billion. Citi was just behind it with 11 deals totaling $6.8 billion, followed by Drexel Hamilton, with nine deals totaling $6.5 billion.

Top Managers

Domestic, Private-Label CMBS

 

1Q2019

1Q2018

Investment Bank

#Deals

Bal$mln

Mkt Shr

#Deals

Bal$mln

Mkt Shr

Academy Securities

9

7,114.82

36.67%

7

6,974.06

35.95%

Citigroup

11

6,797.06

35.03%

8

6,987.37

36.02%

Drexel Hamilton

9

6,524.11

33.63%

8

8,159.13

42.05%

JPMorgan Securities

9

5,984.31

30.85%

10

7,781.89

40.11%

Deutsche Bank

8

5,600.61

28.87%

8

7,915.89

40.80%

Morgan Stanley

7

5,036.41

25.96%

3

2,749.53

14.17%

BofA Merrill Lynch

8

4,865.67

25.08%

2

2,349.53

12.11%

Williams Capital

4

3,632.49

18.72%

0

0

0

Barclays Capital

6

3,352.43

17.28%

4

3,503.62

18.06%

Wells Fargo Securities

4

2,918.60

15.04%

5

4,037.60

20.81%

Credit Suisse

5

2,450.75

12.63%

7

2,342.94

12.08%

Goldman Sachs

4

2,137.94

11.02%

5

3,528.13

18.19%

Cantor Fitzgerald

3

1,307.27

6.74%

3

2,080.07

10.72%

UBS

2

1,072.67

5.53%

3

2,185.07

11.26%

Jefferies

1

774.09

3.99%

0

0

0

Brean Capital

1

682.67

3.52%

0

0

0

Bancroft Capital

1

402.80

2.08%

0

0

0

Performance Trust

1

399.20

2.06%

0

0

0

KeyCorp

2

262.00

1.35%

0

0

0

Natixis

1

199.00

1.03%

6

992.95

5.12%

CIBC

0

0.00

0.00%

1

1,045.17

5.39%

Source: Commercial Real Estate Direct

Both Academy and Drexel Hamilton are military owned institutions, as is Bancroft Capital, which was founded last year by Cauldon D. Quinn, a former Drexel Hamilton veteran who had graduated from the U.S. Naval Academy and served in Afghanistan. He named the company after Capt. Matthew Bancroft, a U.S. Marine with whom he attended the Naval Academy and who had perished when the KC-130 tanker plane he was piloting crashed in Pakistan during Operation Enduring Freedom.

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



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Additional Info

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  • Subject: CMBS - non-deal specific (CMBS-G), Commercial MBS (CMBS)
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Read 211 times Last modified on Wednesday, 03 April 2019

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

 

 

 

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