The soon-to-peak “refi wave” in US CMBS will have loan maturities in excess of $12 billion per month, according to a new report from Moody’s Investor’s Service. And without a significant disruption to the market in the coming months, most of these maturing loans are well positioned to pay off.
Tad Philipp, director of commercial real estate research at Moody’s, said in prepared remarks that the US CMBS refinancing wave is now within a few quarters of cresting. “CMBS loan originators should be able to accommodate the bulk of maturing loans,” he said, “but a significant portion are likely to be refinanced by portfolio lenders or be extended.”
Pre-crisis conduit transaction issuance peaked in 2006-07, with $163 billion and $194 billion, respectively, brought to market, the report shows. And since most conduit loans have 10-year terms and do not fully amortise, the result is the much anticipated “refi wave” within a few quarters.
Of the total collateral backing pre-crisis peak vintage loans, more than two-thirds have a debt yield in excess of 8 percent, a level consistent with recent origination, according to the report. And more than 80 percent of maturing loans have a debt service coverage ratio above 1.40x based on current market rates, a level that is typically sufficient to refinance.
Coupons for 2006-07 loans average about 6 percent, about 1 percent higher than current market levels. As a result, most loans will likely achieve a loan coupon upon refinancing that is lower than the one currently in place, boosting the likelihood of successful refinancing, the report says.