Kroll Bond Rating Agency Releases Monthly CMBS Trend Watch

NEW YORK--()--Kroll Bond Rating Agency (KBRA) released June’s CMBS Trend Watch today.

Despite a sluggish start to the year, private-label pricing volume finished the first half at $34.4 billion, up 27.8% year over year. More than half (52.3%) of that volume, or $18.2 billion, was generated in May and June.

A slow-down doesn’t appear to be in the cards for July as the forward pipeline remains robust. There are more than a dozen single-borrower deals slated to launch through July as well as six conduits and up to three CRE CLOs.

The latter transaction type appears to be gaining popularity, as investors reach for higher-yielding floating-rate paper. With higher demand for these deals, issuers have received attractive pricing, which has brought more players into this space. This could end up being the strongest CRE CLO issuance year post crisis. Seven deals have launched through June, at least five are expected in the third quarter, and there are market rumblings that there is the potential for a few more.

Five conduits priced in June, four of which were within a three-basis-point band for the benchmark 10-year AAA class. The fifth deal, LCCM 2017-LC26, priced outside the range at S+ 110. That transaction was Ladder Capital’s inaugural standalone conduit securitization. Spreads for the BBB- class also came out at a narrow range between S+ 365 and S+ 450.

KBRA published pre-sales for nine deals ($7.1 billion), including three conduits ($2.6 billion), three single borrowers ($2.6 billion), two CRE CLOs ($760.5 million) and one Freddie K-Series transaction ($1.1 billion). Among those, there were several notable transactions, including BXP 2017-GM, which is collateralized by a loan secured by the General Motors Building, which is considered one of the highest-quality office buildings in the country.

There were 251 surveillance actions during the month, including 249 affirmations and two upgrades. The activity was effectuated across 26 transactions, including 13 conduits, six single-borrowers, two Freddie K-Series transactions, two re-remics, two large loans, and one non-performing loan. As part of June’s surveillance activity, KBRA highlighted 41 KBRA Loans of Concern (K-LOCs) that were outstanding at the time of the reviews.

The three-month rolling average KLTV ended June at 94.6%, posting the greatest single-month decline since we began tracking the metric. Reflecting the high concentration of low leveraged loans, the KBRA credit barbell indicator rose to 13.8%.

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About Kroll Bond Rating Agency

KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).

Contacts

Kroll Bond Rating Agency
Analytical Contacts:
Larry Kay, Senior Director
(646) 731-2452
lkay@kbra.com
or
Eric Thompson, Senior Managing Director
(646) 731-2355
ethompson@kbra.com

Contacts

Kroll Bond Rating Agency
Analytical Contacts:
Larry Kay, Senior Director
(646) 731-2452
lkay@kbra.com
or
Eric Thompson, Senior Managing Director
(646) 731-2355
ethompson@kbra.com