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 |
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Average Spread | 330 | 203 | 205 | 198 | 207 |
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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%
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(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 |
