1.6.15: Market Awaits New CMBS Deals to Clarify Pricing

On December 12, UBS, Deutsche Bank, CCRE, KeyBank and others priced the benchmark AAA-rated class of a $825-million multi-borrower CMBS conduit offering at 90 basis points (bp) over swaps, above the upper end of the 85-87 bp range that was prevalent in November. On the same day, Ladder Capital, Wells Fargo, RBS and others priced the benchmark class of a $1.138-billion multi-borrower offering at 85 bp over swaps, an unusually wide difference between the deals. Market participants posited that the Ladder Capital deal was better underwritten, but the exact reasoning was unclear. To further cloud the market, JPMorgan, Barclays, Credit Suisse and others priced the benchmark class of the last multi-borrower CMBS conduit offering for 2014 on December 16 at 95 bp over swaps, creating a very wide range of outcomes between the deals.

With no other CMBS deals pricing since December 16, it is unclear where the benchmark class would price today, creating uncertainty in quoting terms to borrowers on new deals. Many lenders believe (hope) that the market will settle back in the 85 bp over swaps area, but in the meantime, they are adding some additional spread to borrower quotes in case the market for the benchmark class is higher. The recent decline in the 10-year swap rate has also created additional uncertainty, as many CMBS investors require a minimum return, and if the swap declines, bond spreads must increase to maintain minimum yield requirements.

The market should become clear once new multi-borrower CMBS conduit offerings price. The first deal to announce may be an offering by Morgan Stanley, Bank of America and CIBC in which pre-marketing materials have been distributed in anticipation of the deal being announced in mid-January with pricing shortly thereafter.

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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