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

Wednesday, 01 July 2020

2Q Sees $9Bln of CMBS Issuance; Weakest Quarter in Eight Years

The second quarter saw only $9 billion of domestic, private-label CMBS issuance, the lowest quarterly total since the first three months of 2012, when the sector was just pulling itself out of the post-Global Financial Crisis funk. JPMorgan Securities jumped to the top of a ranking of bookrunners, with a hefty 21.3 percent share of the market.

Commercial Real Estate Direct Staff Report

The second quarter saw only $9 billion of domestic, private-label CMBS issuance, the lowest quarterly total since the first three months of 2012, when the sector was just pulling itself out of the post-Global Financial Crisis funk.

Issuance was hard hit by the coronavirus pandemic, which seized markets in mid-March. That led to an issuance drought as only one conduit deal, a tiny one at that, priced in April.

Spreads for benchmark bonds - those with 10-year average lives and the highest possible ratings, which had hovered at about 80 basis points more than swaps in January and February - started widening in early March and spiked to 277.5 bps more than swaps by mid-March. Lending by those planning to securitize their originations ground to a halt. Those lenders rely on market stability to price their loans profitably.

Market conditions started gradually improving, in part as the federal government stepped in to ensure abundant liquidity in all markets. The Fed resurrected the Term Asset Backed Securities Facility in late March, but initially omitted private-label CMBS from its list of eligible securities. A couple of weeks later, it allowed the lending facility to be used to finance the purchase of senior CMBS. Nonetheless, the added available liquidity resulted in a tightening of spreads, which allowed issuers to securitize loans they had held.

Seven deals were issued in May and four last month, bringing issuance for the first half to $30.6 billion, the smallest total since the first half of 2016.

Spreads, meanwhile, have tightened substantially and last week benchmark bonds were being quoted on the secondary market at 112 bps more than swaps, down 165.5 bps from their wides. They've been less than 123 bps for three straight weeks.

Issuance will remain subdued for the remainder of the year, with few industry pros projecting more than $50 billion. Conduit shops, like aircraft carriers, don't turn on a dime. So, even if spreads continue to tighten or remain stable, it would take a while for them to crank up volume to pre-pandemic levels. Nonetheless, 89 percent of lenders surveyed by the CRE Finance Council said their lending programs were partially or fully operational. The remaining lenders surveyed said they were not lending.

Meanwhile, property sales volume, which drives much lending activity, has cratered. Real Capital Analytics last week reported that only $9.8 billion of properties changed hands in May, down an astounding 79 percent from last year. Full-year volume is down 21 percent from a year ago.

And as of the end of last year, only $26.3 billion of CMBS loans were slated to mature this year and next.

JPMorgan Securities moved into the top spot in a ranking of CMBS bookrunners, receiving credit for 9.27 deals totaling $6.5 billion, or 21.3 percent of the issuance thus far this year.

Top Bookrunners

Domestic, Private-Label CMBS

 

1H2020

1H2019

Investment Bank

#Deals

Bal $mln

MktShr

#Deals

Bal $mln

MktShr

JPMorgan Securities

9.27

6,510.29

21.30

9.60

4,491.65

11.25%

Goldman Sachs

5.95

3,902.91

12.77

7.46

4,712.57

12.28%

Citigroup

3.63

3,751.28

12.27

6.77

5,108.82

13.32%

Deutsche Bank Securities

4.61

3,530.18

11.55

5.93

3,882.88

10.12%

Wells Fargo Securities

4.67

3,488.00

11.41

4.83

3,632.66

9.47%

Morgan Stanley

3.14

3,000.68

9.82

6.89

4,259.65

11.10%

Barclays Capital

2.67

1,839.64

6.02

3.91

2,234.51

5.82%

BofA Securities

2.05

1,441.96

4.72

4.57

2,502.66

6.52%

Credit Suisse

2.11

1,155.70

3.78

3.80

3,580.86

9.33%

Societe Generale

1.67

711.58

2.33

2.68

1,005.35

2.62%

Cantor Fitzgerald

1.64

508.52

1.66

2.16

949.10

2.47%

KeyBank

0.84

399.89

1.31

0.90

212.44

0.55%

Natixis

0.57

182.80

0.60

2.90

681.73

1.78%

UBS Securities

0.19

138.19

0.45

1.59

1,124.98

2.93%

Performance

0.00

0.00

0.00

1.00

156.70

0.41%

TOTAL

43

30,561.61

100.00

65

38,536.55

 

It jumped over Citigroup and Goldman Sachs, which had held the top two spots in the ranking at the end of March. JPMorgan's jump was driven by its participation in three deals in May and June. Goldman, meanwhile, ended the half in second place, with a 12.8 percent share of the market. It too had a busy May and June, participating in four deals.

Top CMBS Managers - 1H2020

 

1H2020

   

Investment Bank

#Deals

Bal $mln

Mkt Shr%

Drexel Hamilton

15.00

13,389.69

43.81

Academy Securities

14.00

12,947.42

42.36

Deutsche Bank Securities

14.00

11,909.57

38.97

Citigroup

11.00

11,780.35

38.55

Goldman Sachs

13.00

11,354.58

37.15

JPMorgan Securities

14.00

9,996.53

32.71

Wells Fargo Securities

9.00

9,582.05

31.35

Morgan Stanley

6.00

8,012.73

26.22

Barclays Capital

7.00

4,815.30

15.76

BofA Securities

4.00

3,681.23

12.05

Bancroft Capital

4.00

3,004.93

9.83

Credit Suisse

4.00

1,970.07

6.45

Cantor Fitzgerald

3.00

1,345.58

4.40

Natixis

2.00

1,060.32

3.47

KeyBanc

2.00

1,051.82

3.44

UBS Securities

1.00

731.14

2.39

Jefferies

1.00

727.41

2.38

A ranking that gives full credit to every manager in a deal again had Drexel Hamilton and Academy Securities in the one and two spots, respectively. The two investment banks have come to regularly dominate the manager rankings. Both, along with Bancroft Securities are owned and run by disabled military veterans.

JPMorgan's top bookrunner spot was driven by its dominance in a ranking of loan contributors. It contributed 56.1 loans with a balance of $4.6 billion to the CMBS market during this year's first six months, giving it a 15 percent share of the market. Goldman Sachs was well behind it with $3.7 billion of contributions, or 12.2 percent of the total volume securitized during the period.

As is evident from the ranking, JPMorgan played a big role in securitizing loans through single-asset deals, as the average loan it contributed to deals was a hefty $81.83 million. On the other side of the size spectrum was National Cooperative Bank, whose average loan contribution was $4.26 million.

Top Loan Contributors

Domestic, Private-Label CMBS

1H2020

1H2019

Lender

#Loans

Bal

$mln

Avg Bal $mln

Mkt

Shr %

Bal

$mln

Mkt

Shr %

JPMorgan Chase Bank

56.09

4,589.87

81.83

15.02

3,165.68

8.21

Citibank

78.73

3,720.32

47.25

12.17

4,864.46

12.62

Goldman Sachs

70.49

3,594.19

50.99

11.76

4,730.78

12.28

Morgan Stanley

69.70

2,668.63

38.29

8.73

3,537.42

9.18

Wells Fargo Bank

62.95

2,579.33

40.97

8.44

2,591.28

6.72

Deutsche Bank

62.44

2,518.47

40.33

8.24

4,024.24

10.44

Athene Annuity

23.00

1,884.41

81.93

6.17

0.00

0.00

Barclays Bank

38.40

1,422.86

37.05

4.66

2,054.42

5.33

Bank of America

59.00

1,385.05

23.48

4.53

2,451.58

6.36

Arbor Realty

40.00

727.15

18.18

2.38

0.00

0.00

Credit Suisse

21.00

725.84

34.56

2.38

2,883.48

7.48

Societe Generale

16.20

681.06

42.04

2.23

1,005.49

2.61

Cantor Commercial Real Estate

19.50

508.81

26.09

1.66

661.52

1.72

3650 REIT

17.00

505.99

29.76

1.66

332.73

0.86

Sabal

59.00

400.10

6.78

1.31

0.00

0.00

KeyBank

22.50

399.79

17.77

1.31

491.25

1.27

Starwood Mortgage Finance

28.00

335.84

11.99

1.10

524.81

1.36

Natixis

5.00

308.95

61.79

1.01

727.63

1.89

Argentic Real Estate Finance

17.00

304.73

17.93

1.00

400.23

1.04

LoanCore Capital

13.00

293.94

22.61

0.96

1,087.32

2.82

Rialto Mortgage Finance

29.00

263.30

9.08

0.86

761.55

1.98

Ladder Capital Finance

14.00

201.82

14.42

0.66

407.45

1.06

National Cooperative Bank

38.00

162.01

4.26

0.53

120.31

0.31

LMF Commercial

10.00

142.94

14.29

0.47

0.00

0.00

UBS Real Estate Securities

13.00

138.87

10.68

0.45

932.95

2.42

Benefit Street Partners

10.00

97.37

9.74

0.32

172.08

0.45

ReadyCap Mortgage

0.00

0.00

0.00

0.00

399.20

1.04

C-III Commercial Mortgage

0.00

0.00

0.00

0.00

125.11

0.32

CIBC World Markets

0.00

0.00

0.00

0.00

83.65

0.22

TOTAL

 

30,561.63

 

 

38,536.62

 

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





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Data Digest

 

CMBS DELINQUENCY VOLUME

dqdataFP1

 

CMBS SPECIAL SERVICING VOLUME

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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

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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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