6.29.12: CMBS Spreads Widen Further, Affecting Loan Rates

After holding relatively steady in the face of rising CMBS spreads, conduit loan rates are starting to increase; spreads on the two most recent deals from JP Morgan/CIBC and UBS/Barclays widened at pricing.  Prior to these deals, CMBS spread widening was offset by decreases in the swap rate that left the all-in rate to borrowers on a $10-million shopping center or office building underwritten to a 70% LTV and 1.35x debt-service coverage ratio in the 4.75% area.

The swap rate is no longer declining in tandem with the increases in CMBS spreads.  While the 10-year swap rate hovers around 1.75%, CMBS loan spreads have increased to the 3.25% area, resulting in an all-in rate to the borrower of 5.0%.

The JPM/CIBC deal, a $1.3-billion transaction, priced on June 22 its $346.9-million super-senior class of 9.9-year bonds at 150 basis points (bp) over swaps; up from 140 bp on the prior deal by RBS and Wells Fargo that priced on June 7.  UBS and Barclays priced a $1.2-billion offering on June 28 with its $479.7-million super-senior class pricing at 160 bp, 10 bps wider than the JPM/CIBC deal and 20 bps wider than the RBS/Wells deal.

“The widening of spreads on CMBS issues is putting upward pressure on borrower loan rates,” commented Michael D. Sneden, Executive Vice President of ValueXpress.  “The supply of CMBS is greater than what the investment community can absorb, considering the yield on 10-year super-senior CMBS is a relatively low 3.25%.”

This entry was posted in CMBS Conduit Loans, Commercial Lending, Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress and tagged , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s