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Thursday, 05 July 2018

Rialto Tops Conduit B-Piece Buyers, Risk Retainers in 1H

Rialto Capital Management was the most-active buyer of CMBS conduit B-pieces during the first half of the year, taking the subordinate bonds of four deals totaling $3.2 billion, or 16.4 percent of all conduits. The Miami investment manager also was the most active retainer of the risk pieces of conduit deals.

Commercial Real Estate Direct Staff Report

Rialto Capital Management was the most-active buyer of CMBS conduit B-pieces during the first half of the year, taking the subordinate bonds of four deals totaling $3.2 billion, or 16.4 percent of all conduits.

The Miami investment manager also was the most active retainer of the risk pieces of conduit deals. It purchased the horizontal risk tranches, which totaled $278.46 million, of four conduit deals.

But the B-piece market has become less concentrated than it had been. Rialto, the most active buyer of such bonds in the CMBS 2.0 era, is no longer as dominant as it was. It held a 16.4 percent share of the market during the first half, down from a 30.5 percent share last year. The list of B-piece buyers hasn't necessarily gotten longer - 11 investors participated in the latest period, up from 10 a year ago. Instead, some investors have become more active.

Most-Active CMBS B-Piece Buyers
Private-Label Issuance

1H2018

1H2017

B-Piece Investor

#Deals

Bal $mln

Mkt
Shr%

#Deals

Bal
$mln

Mkt
Shr%

Rialto Capital Management

4

3,224.14

16.37

7

6,282.93

30.41

KKR Real Estate Finance

3

2,871.16

14.58

5

4,747.28

22.98

Argentic Securities

3

2,780.93

14.12

2

1,724.78

8.35

Barings

2

2,665.49

13.54

1

1,043.45

5.05

Eightfold Real Estate Capital

2

1,854.58

9.42

2

2,042.35

9.88

Prime Finance

2

1,327.01

6.74

1

1,154.65

5.59

Torchlight Investors

1

1,287.15

6.54

-

-

-

LNR Partners

1.5

1,254.95

6.37

1

1,092.98

5.29

LoanCore Capital

1

1,006.08

5.11

-

-

-

Ellington Management

1

901.17

4.58

-

-

-

Stream Asset Management

0.5

520.57

2.64

-

-

-

BlackRock Realty Advisors

-

-

-

1

977.09

4.73

NorthStar Real Estate Income Trust

-

-

-

1

958.99

4.64

C-III Capital Partners

-

-

-

1

637.56

3.09

TOTAL         

21

19,693.23

 

22

20,662.06

 

Right behind it among B-piece buyers was KKR Real Estate Finance, which invested in three deals totaling $2.9 billion, and Argentic Securities, which accounted for three deals totaling $2.8 billion. Those two also were right behind Rialto in a ranking of risk retainers, but in reverse order, with Argentic retaining $266.9 million of bonds from four deals, and KKR retaining $265.8 million from three deals.

In one deal with a hybrid, or L-shaped structure, Argentic took down both the deal's vertical and horizontal risk slices.

Most-Active Retainers of CMBS Conduit Risk - 1H2018

Name

Vert#

Amt $mln

Hor #

Amt $mln

Total #

Amt $mln

Rialto Capital Management

-

-

4.00

278.49

4.00

278.49

Argentic Securities

1.00

17.76

3.00

249.10

4.00

266.86

KKR Real Estate Finance

-

-

3.00

265.81

3.00

265.81

Barings

-

-

2.00

255.27

2.00

255.37

Prime Finance

-

-

2.00

132.23

2.00

132.23

LoanCore Capital Markets

-

-

1.00

97.29

1.00

97.29

Wells Fargo Bank

1.41

83.01

-

-

1.41

83.01

Morgan Stanley

1.52

59.93

-

-

1.52

59.93

Eightfold Real Estate Capital

-

-

      1.00

54.94

1.00

54.94

Starwood/LNR Partners

1.00

27.56

1.00

24.82

2.00

52.38

Deutsche Bank

1.00

40.47

-

-

1.00

40.47

Goldman Sachs

1.00

30.43

-

-

1.00

30.43

Citigroup

0.52

27.46

-

-

0.52

27.46

Bank of America

0.55

26.73

-

-

0.55

26.73

Barclays Bank

1.00

17.24

   

1.00

17.24

Meanwhile, the horizontal risk-retention structure is gaining popularity among both conduit and single-borrower deals, with a dozen conduit transactions, or 58 percent of the total volume so far this year, being structured that way. A total of 22 single-borrower deals, or 57.2 percent, of the total had a similar structure.

CMBS Risk-Retention Structures 1H2018

 

TOTAL

Conduit

Single-Borrower

 

#Deals

Bal $mln

%

#Deals

Bal $mln

%

#Deals

Bal $mln

%

Vertical

24

12,851.83

32.26

5

4,303.92

21.85

19

8,547.91

42.77

Horizontal

35

23,053.37

57.86

12

11,450.41

58.14

22

11,438.00

57.23

Hybrid

4

3,938.90

9.89

4

3,938.90

20.00

0.00

0.00

0.00

TOTAL

63

39,844.10

 

21

19,693.23

 

41

19,985.91

 

In contrast, during the first half of last year, 42.6 percent of all conduits, by dollar volume, had a hybrid, or L-shaped risk-retention structure. Only four deals, or 20 percent of the total, were structured that way this year.

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

 

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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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