CMBS buyers returned to the market in early 2014 to gobble up the year’s first issue, a $1.4-billion offering by Deutsche Bank, Nataxis, Cantor Fitzgerald and Liberty Island. The long-term, super-senior bonds priced at 87 basis points (bp) over swaps, down 3 bp from initial price guidance and 8 bp lower than the level achieved on the equivalent bonds from the previous issue. Further down the capital stack, Class AM CMBS priced at 115 bp over swaps and the Class Bs from the deal priced at 165 bp over swaps. The classes were well oversubscribed.
“The DB/Nataxis transaction featured excellent underwriting characteristics and high collateral quality,” noted Jim Brett, head of CMBS analytics at ValueXpress. “Some investors thought that the high quality of the issue may have contributed to the tight spreads on the deal and may not be indicative of market levels. We will have to wait for the next CMBS deal for confirmation, but the secondary market has tightened if this deal sets the new market levels.”
“Based on the results of CMBS spread tightening, we are seeing spreads to borrowers tighten another 10-15 bp to the 220 bp area for full-leverage commercial assets and 250 bp area for hotels,” commented Michael D. Sneden, Executive Vice President at ValueXpress. “With the 10-year Swap Rate (Swap) Index hovering around 2.95%, all-in rates to borrowers are falling toward the low 5% area right now. Low leverage deals can be under 5%.”