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Tuesday, 03 October 2017

CMBS Issuance Rebounds in 3Q; YTD Volume Up 35 Percent from 2016

Third-quarter issuance of private-label CMBS totaled $26.3 billion, up 22 percent from the second quarter. That brings volume for the year to $60.4 billion, up nearly 35 percent from the $44.8 billion that had been issued to this point last year.

Commercial Real Estate Direct Staff Report

Third-quarter issuance of private-label CMBS totaled $26.3 billion, up 22 percent from the second quarter, and was the busiest quarter since early 2015.

That brings volume for the year to $60.4 billion, up nearly 35 percent from the $44.8 billion that had been issued to this point last year. It's now become highly likely that issuance for the year will total roughly $80 billion. At the start of the year, many had expected issuance to come in somewhere between $65 billion and $75 billion, in part because of the risk-retention rules that went into effect late last year.

CMBS Issuance3Q

But the market has shown an ability to deal with those rules, which require that issuers retain a 5 percent piece of every deal they issue, or sell a piece equal to 5 percent of a deal's market value to an investor that's restricted from trading the position, or financing it. Issuers also can use a combination of those strategies.

The restrictions apply to both conduit and single-borrower deals. In the conduit world, 11 deals with a balance of $10.5 billion, of the 35, with a balance of $33 billion, have had horizontal risk-retention pieces. Thirteen, with a balance of $11.9 billion, or 36 percent of the total so far, were structured with vertical pieces. And the remaining 11, with a balance of $10.6 billion, had hybrid, or L-shaped, retention structures.

Domestic, Private-Label CMBS Issuance

3Q2017

3Q2016

Deal Type

#Deals

Bal $mln

#Deals

Bal $mln

Conduit

13

12,333.88

15

13,107.48

Single-borrower

22

13,212.30

10

4,882.30

Other

2

716.56

0

0

TOTAL

37

26,262.74

25

17,989.78

Issuers have favored the vertical risk-retention structure for single-borrower deals, adopting it in 24 deals, with a balance of $15 billion, of the 44 single-borrower deals so far this year. Twenty deals totaling $10.3 billion had horizontal structures.

While issuance picked up considerably during the latest quarter, the thinking is that it still is running well below the pace that it should, absent risk retention and the Volcker rule, which has resulted in a sharp decline in secondary market trading. According to an estimate by the Commercial Real Estate Finance Council, issuance should have reached nearly $140 billion this year if certain regulations hadn't been implemented in the wake of the Great Financial Crisis.

Underwritten credit metrics have remained extremely conservative - the debt-service coverage ratio for a recent conduit deal was a record 3.11x, while the loan-to-value ratio for that same deal came in at less than 50 percent. Still, investors aren't really paying up for bonds. Spreads for benchmark bonds have remained generally in the range of 90 to 96 basis points more than swaps, with a couple of outliers.

JPMorgan Securities, which during the latest quarter was involved as bookrunner in six single-borrower deals, including the $2.1 billion Motel 6 Trust, 2017-MTL6, took top honors in a ranking of bookrunners. In total, it handled 18 percent of the quarter's issuance, giving it a slim lead over Goldman Sachs in an annual ranking.

Top Bookrunners
Domestic, Private-Label CMBS

3Q2017

3Q2016

Investment Bank

#Deals

Bal $mln

Mkt Shr%

#Deals

Bal $mln

Mkt Shr%

JPMorgan Securities

6.80

4,715.90

17.96

4.93

3,881.76

21.58

Citigroup

4.77

3,657.55

13.93

3.79

2,582.70

14.36

Deutsche Bank

4.06

3,146.90

11.99

2.91

1,948.64

10.83

Morgan Stanley

3.80

2,780.64

10.59

2.67

1,863.27

10.36

Wells Fargo Securities

3.84

2,605.09

9.92

2.89

2,700.12

15.01

Goldman Sachs

4.60

2,470.64

9.41

1.79

1,546.14

8.59

Barclays Capital

2.21

1,694.51

6.45

1.59

1,008.75

5.61

UBS Securities

1.74

1,393.62

5.31

0.79

613.16

3.41

BofA Merrill Lynch

1.26

1,320.61

5.03

1.64

927.54

5.16

Societe Generale

1.11

758.74

2.89

0.75

551.87

3.07

Natixis

0.79

659.87

2.51

-

-

-

Credit Suisse

1.51

562.01

2.14

1.00

180.80

0.63

Jefferies

0.53

486.65

1.85

-

-

-

TOTAL

37

26,262.74

 

25

17,989.78

 

JPMorgan has been dominant in the single-borrower space all year. Not so much in the conduit space, where it's handled the books on only five deals this year and only one during the latest quarter.

Top Bookrunners
Domestic, Private-Label CMBS

9Mos2017

9MosQ2016

Investment Bank

#Deals

Bal $mln

Mkt Shr%

#Deals

$mln

MktShr%

JPMorgan Securities

11.70

8,474.19

14.04

9.30

6,397.55

14.27

Goldman Sachs

12.05

8,066.71

13.37

6.40

5,291.18

11.80

Citigroup

9.47

7,567.42

12.54

8.39

6,193.08

13.82

Deutsche Bank

9.18

7,436.67

12.32

7.69

5,565.27

12.41

Wells Fargo Securities

9.27

7,201.19

11.93

8.99

6,788.69

15.14

Morgan Stanley

8.22

6,314.01

10.46

5.26

3,475.02

7.75

Barclays Capital

4.52

3,593.41

5.95

3.20

1,899.68

4.24

BofA Merrill Lynch

4.96

3,405.22

5.64

5.12

2,532.38

5.65

UBS Securities

3.19

2,430.95

4.03

2.09

1,595.20

3.56

Credit Suisse

5.77

2,416.95

4.00

3.00

1,884.69

4.20

Natixis

2.82

1,388.09

2.30

0.50

125.80

0.28

Societe Generale

1.47

1,023.07

1.70

2.28

1,234.91

2.75

Cantor Fitzgerald

0.85

549.25

0.91

2.80

1,843.98

4.11

Jefferies

0.53

486.65

0.81

-

-

-

TOTAL

84

60,353.79

 

65

44,827.44

 

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

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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

 

RCA CPPI

 

cppichart FP

 

 

CMBS 2.0 Spreads

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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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