Kroll Bond Rating Agency Releases Monthly CMBS Trend Watch

NEW YORK--()--Kroll Bond Rating Agency (KBRA) releases July’s CMBS Trend Watch.

Private-label pricing volume remained healthy through July at $7.6 billion, despite a decrease from $10.1 billion in June. The July deals brought the year-to-date (YTD) volume to $41.9 billion, up 28.7% year-over-year (YOY). Much of the increased volume YTD can be attributed to the $16.3 billion of single borrower (SB) deals that priced this year, resulting in a YOY increase of 100.5% within the segment.

In July alone, SB deals accounted for eight of the 12 deals that priced, bringing the year-to date total to 30 – already in close proximity to FY 2016, when 39 SB deals were executed. Based on our forward-looking pipeline, CMBS volume is expected to remain strong through August with up to eight SB deals, as well as a few conduit and commercial real estate (CRE) CLO deals that are expected to launch during the month. The conduit segment appears to be picking up, as we are now aware of eleven transactions that may launch through mid-October.

New issue conduit spreads saw moderate tightening during July. For the benchmark 10-year AAA class, spreads came in from the June range of S+91 to S+94 (excluding the S+110 outlier) to S+88 to S+92 in July. Pricing on the benchmark class for CD 2017-CD5 of S+88 is tied with GSMS 2017-GS5 and BACM 2017-BNK3 for having the tightest spread observed thus far in 2017. The comparable BBB- spreads in July remained relatively flat from the prior month ranging from S+345 to S+375; however, pricing was only available for two of the priced deals.

KBRA published pre-sales for seven deals ($6.1 billion), including two conduits ($1.8 billion), two single borrowers ($2.2 billion), one Freddie K-Series transaction ($1.3 billion), one single-borrower single-family rental (SFR) ($458.6 million), and one CRE CLO ($243.8 million).

There were 178 surveillance actions during the month, including 172 affirmations and six upgrades; the activity was effectuated across 17 transactions. As part of July’s surveillance activity, KBRA highlighted 39 KBRA Loans of Concern (K-LOCs) that were outstanding at the time of the reviews.

In this month’s spotlight section, we highlight two of our recent publications: Houston, We Have a Lodging Problem and For Now, Supply Concerns Bypass Securitized Multifamily. In the latter report, we note overall softening in the multifamily sector, primarily driven by cyclically high levels of class-A supply and construction. However, this may bode well for post-2010 conduits and Freddie K-Series transaction, as our analysis indicates that nearly 80% of the underlying collateral is class B or class C. The report also reviewed 59 metropolitan statistical areas (MSAs) which were ranked based on various demand and supply factors.

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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

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

Contacts

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