Apparently, even the Greeks were tired of being in the limelight, which helped the financing markets avoid another summer meltdown and allowed the market to build some momentum going into the fourth quarter. CMBS lenders are reporting strong origination volume and seem more comfortable than any time in the past few years that they will be able to book profits on the deals they’ve been warehousing. Spreads tightened steadily through July and August, though the market gave back about 5bps in spreads during the last two weeks.
We are halfway through the digestion period for the super-bubble of CRE loan maturities that began in 2009 and is projected to peak in 2013. The good news is that CRE maturities decline significantly after 2013, with a smaller spike in 2016-17 comprised of 10-year deals originated in 2006 and 2007. The bad news is that the lending volume in the securitization market has not recovered to a level sufficient to fill the refinancing gap, which means that special servicers will continue to be very busy for the next 18-24 months.
Delinquency rates for CMBS moved higher in July, with Trepp reporting that the 30+ day delinquency rate had inched up 18bps to 10.34%. Surprisingly, despite the strong MF fundamentals we’re seeing in many markets and the easy access to GSE financing at record low rates, the delinquency numbers for MF properties are the worst of any major asset class with delinquency rates for MF climbing to 15.69%. The best performing asset class is retail, where strengthening consumer spending combined with the early wash-out of the sector’s weakest tenants, has helped retail assets relative to the office and industrial sectors.
The investor flight to quality in gateway cities has led to prices in major markets recovering more than twice as quickly as those in non-major markets. However, non-major markets saw greater price appreciation over the last month, three- month and 12-month periods, as investors continue to look beyond gateway markets in their quest for higher yields.
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Cushman & Wakefield's Equity, debt and Structured Finance Group has raised approximately $25 billion of capital from more than 125 capital sources for 270 transactions in the past five years. For more information on this report or on how we can assist your financing needs or hospitality or note sales, please contact any of our offices or:
Christopher T. Moyer, is Associate Director, Equity, Debt & Structured Finance, Cushman & Wakefield, Inc. Christopher Moyer is a registered representative of and offers securities-related services through Cushman & Wakefield Securities, Inc. - Member: FINRA & SIPC. Cushman & Wakefield, Inc. and Cushman & Wakefield Securities, Inc. are affiliated entities.
For investment in Southern Arizona, reach PICOR Principal, Bob Kaplan.