KBRA Releases Monthly CMBS Trend Watch

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

In this month’s issue, we take a closer look at the Housing Stability and Tenant Protection Act of 2019 as part of our Spotlight feature, NYC Rental Reform: Potential Impact on CRE Securitization. We review some highlights of the new law and their potential impact on 142 CMBS 2.0 fixed rate and rated K-Series transactions with NYC loan collateral ($3.0 billion) that we have identified as likely to have rent stabilized units. In addition, we also identified—within KBRA’s rated commercial real estate collateralized loan obligation (CRE CLO) population—17 NYC rent regulated properties with a current total loan balance of $423.2 million spread across 12 transactions. These deals, as well as the top 10 for the CMBS 2.0 and Freddie K transactions containing rent stabilized buildings, are exhibited in the report.

While the passage of rent regulation reform will likely negatively affect NYC’s rent stabilized multifamily market, it is not expected to have an immediate to near-term credit impact on CRE securitizations. However, in the immediate to near term, rental reform could influence the number of NYC rent stabilized multifamily properties that are securitized, and potentially affect refinancing opportunities.

CMBS private label pricing volume decreased in June by about one-third to $7.8 billion from $11.6 billion in May, bringing the year-to-date issuance total to $39.1 billion. On a year-over-year basis, volume is off 3.5% from 2018. Although issuance slowed in June, it does not appear that the summer doldrums will spill over to CMBS issuance.

We currently have visibility into a number of future transactions that will come to market, including up to seven conduits, more than a half dozen single-borrower deals, three Freddie K-Series deals and up to eight CRE CLO transactions. At this juncture, it seems that many of the transactions will launch this summer.

KBRA published pre-sales for three conduit deals ($2.3 billion) in June. We also published a pre-sale report for one European securitization with collateral in the Netherlands (62.7% of loan balance), Germany (25.6%), and Finland (11.7%).

June’s surveillance activity includes a review of 399 rated classes consisting of 391 affirmations, five upgrades, and three downgrades. For June, we highlighted 59 KBRA Loans of Concern (K-LOCs) and 15 KBRA Performance Outlook (KPO) changes, including 11 to Underperform from Perform, one to Perform from Underperform, and three to Outperform from Perform.

To access ratings, reports and disclosures, click here.

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About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

Contacts

Analytical Contacts:
Giselle Vuong, Senior Analyst
(646) 731-2435
gvuong@kbra.com

Larry Kay, Senior Director
(646) 731-2452
lkay@kbra.com

Eric Thompson, Senior Managing Director
(646) 731-2355
ethompson@kbra.com

Contacts

Analytical Contacts:
Giselle Vuong, Senior Analyst
(646) 731-2435
gvuong@kbra.com

Larry Kay, Senior Director
(646) 731-2452
lkay@kbra.com

Eric Thompson, Senior Managing Director
(646) 731-2355
ethompson@kbra.com