New Liquidating Trust CMBS Deal Announced

J.P. Morgan announced last Thursday the first (in the modern era) CMBS issuance of non-performing commercial real estate loans. Depending upon market reception and after-market trading, this could be the first of many such deals as lenders continue to attempt to de-leverage.

The offering is expected to be comprised of commercial mortgage loans characterized as real estate owned (REO) or delinquent with a sliver of performing loans; most of the collateral is reported to be currently non-paying with non-performing loans assumed to have a 0% coupon (meaning that the assets underlying the loan are not generating sufficient cash flow to pay interest and fees). The transaction is over-collateralized in an attempt to offset anticipated future loan losses.

Management of the trust will attempt to sell or otherwise dispose of the collateral quickly enough to pay down the bond balance before the reserves to pay bond interest and fees are exhausted.

More to follow as this trade “could be the start of something big.”

Monday’s Numbers

Spreads reported by Trepp LLC continued to narrow, coming in approximately 10 basis points during the survey period; mortgage capital remains both available and affordable, even with many lender’s instituting floor pricing.

Asking Spreads over U.S. Treasury Bonds in Basis Points

(10-year Commercial and Multifamily Mortgage Loans with 50% to 59% Loan-to-Value Ratios)

 

12/31/09

12/31/10

12/31/11

3/23/12

Month Earlier

Office

342

214

210

206

214

Retail

326

207

207

199

209

Multifamily

318

188

198

188

200

Industrial

333

201

205

197

205

 

 

 

 

 

Average Spread

330

203

205

198

207

 

 

 

 

 

10-Year Treasury

3.83%

3.29%

1.88%

2.25%

2.01%

Over the past month, the Cushman & Wakefield Sonnenblick-Goldman Survey came-in “smartly”, with 10-year rates improving as much as 40 basis points for some property sectors.

Property Type

Mid-Point of Fixed Rate Commercial Mortgage

Spreads For 5 Year Commercial Real Estate Mortgages

 

12/31/10

1/5/12

1/26/12

2/28/12

3/28/12

Multifamily – Non-Agency

+270

+245

+240

+240

+230

Multifamily – Agency

+280

+255

+245

+210

+195

Regional Mall

+280

+300

+300

+300

+275

Grocery Anchored

+280

+295

+295

+290

+270

Strip and Power Centers

 

+320

+320

+315

+295

Multi-Tenant Industrial

+270

+305

+310

+310

+285

CBD Office

+280

+310

+310

+295

+270

Suburban Office

+300

+320

+320

+310

+290

Full-Service Hotel

+320

+350

+350

+350

+325

Limited-Service Hotel

+400

+360

+360

+360

+335

5-Year Treasury

2.60%

0.89%

0.78%

0.83%

1.03%

Source: Cushman & Wakefield Sonnenblick Goldman.

Property Type

Mid-Point of Fixed Rate Commercial Mortgage

Spreads For 10 Year Commercial Real Estate Mortgages

 

12/31/10

1/5/12

1/26/12

2/28/12

3/28/12

Multifamily – Non-Agency

+190

+205

+210

+210

+200

Multifamily – Agency

+200

+200

+205

+180

+165

Regional Mall

+175

+245

+245

+235

+275

Grocery Anchor

+190

+240

+240

+230

+270

Strip and Power Centers

 

+255

+255

+250

+290

Multi-Tenant Industrial

+190

+245

+255

+250

+280

CBD Office

+180

+250

+240

+320

+270

Suburban Office

+190

+265

+260

+250

+290

Full-Service Hotel

+290

+300

+290

+290

+325

Limited-Service Hotel

+330

+310

+315

+315

+345

10-Year Treasury

3.47%

2.00%

1.97%

1.90%

2.21%

Source: Cushman & Wakefield Sonnenblick Goldman.

Property Type

Mid-Point of Floating-Rate Commercial Mortgage

Spreads For 3 – 5 Commercial Real Estate Year Mortgages

12/31/10

1/5/12

1/26/12

2/28/12

3/28/12

Multifamily – Non-Agency

+250-300

+200-250

+200-250

+200-250

+200-250

Multifamily- Agency

+300

+220-265

+220-265

+220-265

+220-265

Regional Mall

+275-300

+250-350

+210-265

+200-265

+200-265

Grocery Anchored

+275-300

+240-325

+200-275

+200-275

+200-275

Strip and Power Centers

 

+250-350

+225-300

+225-300

+225-300

Multi-Tenant Industrial

+250-350

+270-350

+225-305

+225-305

+225-305

CBD Office

+225-300

+275-350

+225-300

+225-300

+225-300

Suburban Office

+250-350

+300-350

+250-325

+250-325

+250-325

Full-Service Hotel

+300-450

+375-475

+350-425

+275-400

+275-400

Limited-Service Hotel

+450-600

+375-550

+400-500

+350-550

+325-450

1-Month LIBOR

0.26%

0.30%

0.27%

0.24%

0.24%

3-Month LIBOR

0.30%

0.58%

0.55%

0.49%

0.47%

* A dash (-) indicates a range.

Source: Cushman & Wakefield Sonnenblick Goldman.

Year-to-Date Public Equity Capital Markets

DJIA (1): +8.14%
S & P 500 (2): +12.00%
NASDAQ (3): +18.67%
Russell 2000 (4):+12.07%
Morgan Stanley U.S. REIT (5):+9.78%
_____
 (1) Dow Jones Industrial Average. (2) Standard & Poor’s 500 Stock Index. (3) NASD Composite Index.(4) Small Capitalization segment of U.S. equity universe. (5) Morgan Stanley REIT Index.

U.S. Treasury Yields

12/31/10

12/31/11

3/30/12

3-Month

0.12%

0.01%

.07%

6-Month

0.18%

0.06%

.13%

2 Year

0.59%

0.24%

.33%

5 Year

2.01%

0.83%

1.04%

10 Year

3.29%

1.88%

2.21%

                                                  

Key Rates (in Percentages)

 

Current

1 Mo. Prior

3 Mo. Prior

6 Mo. Prior

1 Yr. Prior

Fed Funds Rate

0.10

0.12

0.04

0.08

0.14

Federal Reserve Target Rate

0.25

0.25

0.25

0.25

0.25

Prime Rate

3.25

3.25

3.25

3.25

3.25

US Unemployment Rate

8.30

8.30

8.70

9.10

9.00

1-Month Libor

0.24

0.24

1.30

0.24

0.24

3-Month Libor

0.47

0.48

0.58

0.37

0.30