11.6.13: CMBS Prices See-Saw

The CMBS market is having trouble finding direction subsequent to the pricing of the CMBS offering from RBS and Wells Fargo on Monday, November 4 in which the benchmark super-senior class of the offering was priced at a spread of 93 basis points (bp) over swaps (down from 105 bp on the previous Cantor Fitzgerald issue from late September).

Two additional CMBS transactions priced on Friday, November 8: a $1.13-billion deal from J.P. Morgan and a $1.08-billion deal from Goldman Sachs. For the Morgan deal the benchmark super-senior class priced at 96 bp over swaps, a little softer than the RBS/Wells issue, but still significantly tighter than the 105 bp from the Cantor deal.

The Goldman deal did not fare well. The benchmark super-senior class priced at 108 bp over swaps, far worse than prior deals, including the Cantor deal. There was no consensus among traders why the Goldman deal fared worse, but given both deals priced the same day, it is likely that collateral or loan underwriting metrics accounted for the difference.

“It is interesting to note that pieces of the Miracle Mall Shops in Las Vegas have shown up in the Cantor deal and the Goldman deal, both of which priced wider than other deals that priced around the same time,” said Jim Brett, head of CMBS analytics at ValueXpress. “We thought that loan was aggressively underwritten and we have not bought any bonds from issues that contain the split pieces of that loan.”

In any event, the inconsistency in new issue CMBS pricing is making it harder for loan originators to set pricing on new loan applications. But the good news for borrowers is that, for now, most CMBS origination shops are leaving pricing unchanged as competition is fierce and many firms believe spread increases will cause them to lose business.

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

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