Trepp predicts $36bn of issuance for US commercial mortgage backed securities this quarter, which would be the greatest dollar volume for any quarter since the market peak, Real Estate Capital has learned.
The research and data firm’s prediction trounces last year’s first quarter, which logged just $16bn in issuance and, at such a pace, could result in some $144bn in total issuance for the year.
That figure would stretch well beyond last year’s $94.1bn and supersede what most industry insiders were predicting up until this point.
A CRE Finance Council survey of 77 companies released in January showed that just 18% of respondents anticipated more than $125bn this year. And Morgan Stanley in December predicted that 2015 issuance would be $125bn but could reach $140bn only in a “bull case scenario,” which was one of the more aggressive predictions thus far.
But as previous years proved, the CMBS market is not easy to predict and there is often significant fluctuation between quarters. While the first quarter of last year saw just $16bn in issuance, that figure jumped to about $32.6bn in the third quarter, and the year closed around $94bn. So far this year there was just $13.7bn of CMBS issuance, but there is an additional $23bn-plus worth of deals in the pipeline, according to Trepp.
Among trends to watch are the upcoming wall of maturities and increases in defeased loans – where a borrower substitutes a government bond or other eligible security of equivalent yield as collateral for its loan in the CMBS, leaving the sponsor free to sell or refinance the property.
Trepp research analyst Sean Barrie noted that 172 loans defeased in January to the tune of $2.9bn, the second-highest total since August 2007.
Also, any further dips in oil prices could have impacts on oil towns across the country. And, the firm is monitoring Staples and Office Depot following the announcement earlier this month of a likely merger between the two retailers.
Issuance of CMBS peaked in 2007, when there was about $230bn of volume, but ground to a standstill during the recession.
The biggest deal so far this year was COMM 2015-DC1, a $1.4bn CMBS conduit transaction collateralized by 67 fixed rate commercial mortgage loans that are secured by 81 properties.
Deals in the pipeline include a $1.75bn, single borrower, floating-rate Motel 6 portfolio from Blackstone; and a $4.25bn, single borrower, fixed-rate IndCor Properties industrial portfolio from Singapore’s GIC, which will be broken into multiple deals.