The market for commercial real estate mortgages sliced, diced, priced, and marketed as commercial mortgage-backed securities is back—with a vengeance. In the United States, issuance in the first quarter of 2011 equaled $8.7 billion, with non-U.S. offerings totaling $1.3 billion. With at least seven offerings totaling approximately $9.5 billion in process, U.S. issuance this year could exceed $40 billion.

The top ten originators, i.e., the firms that originated, closed, and warehoused (for their own account and risk) prior to securitization included the following:

J.P. Morgan

18.1%

Morgan Stanley

14.3%

Goldman Sachs

13.9%

Deutsche Bank

12.1%

UBS

10.0%

Wells Fargo

7.1%

Citigroup

6.4%

RBS

6.4%

Bank of America

4.5%

Ladder Capital

4.4%

Source: Commercial Mortgage Alert.

Parsing the first quarter “stats”:

  • Nine deals were completed in the U.S. market, and two offerings were completed in the non-U.S. market;
  • Of the nine offerings completed in the U.S. market, eight involved multiple borrowers; and,
  • Property types collateralizing the various U.S. offerings included the following: retail (53.8 percent), office (20.9 percent), multifamily (6.2 percent), and hotel (5.3 percent).

Key takeaways:

  1. If you are in the market for mortgage financing, the top 10 contributors list above effectively provides the start of a road map as to who will be originating commercial real estate loans for future securitization. We believe there are as many as 25 conduits active in the market at the moment.
  2. Retail (53.8 percent) and office (20.9 percent) made up approximately 75 percent of the collateral underlying first quarter offerings, defining the conduit’s apparent directional bias regarding collateral. The question under discussion is whether this will present an observable concentration risk in future offerings, affecting pricing.