Two CMBS conduit deals were being marketed during the week of June 8, a $1.3-billion offering by Deutsche Bank, CCRE, Ladder Capital and KeyBank, and a $1.2-billion offering by Wells Fargo, Rialto Mortgage Finance, Silverpeak Real Estate Finance, Walker & Dunlop and NCB.
Price guidance on the Deutsche Bank deal for the benchmark AAA-rated super-senior class was being pitched at a spread in the 89-basis-point (bp) area over swaps. That mirrored the level achieved on the long-term, super-senior bonds in the previous conduit issue, a $1.1-billion offering by Bank of America, Morgan Stanley, CIBC and Starwood Mortgage that priced on June 5. But that spread was slightly wider than the 85-87 bp range in the six previous conduit deals.
Dealers attributed the spread widening to heavy supply. “There are a lot of new issues coming out, and the investors know it too,” said one CMBS salesman. “I don’t think they’re going to give issuers much of a break in that regard.” Many dealers believe spreads will move wider, into the 90-95 bp range, as the typically slower summer months may find buyers on vacation.
The other investment-grade classes appear to be holding steady. The junior AAA-rated class of the Bank of America/Morgan Stanley deal priced at 117 bp over swaps, within the range of 115-125 bp range in recent deals. The AA-rated class B priced at 140 bp over swaps, below the recent range of 150-165 bp in recent deals.
“Borrowers are likely to see a 5 bp increase in loan spreads if the upcoming calendar of CMBS deals price the benchmark AAA-rated super-senior class at levels greater than 90 bp over swaps,” commented Michael D. Sneden, Executive Vice President at ValueXpress. “Should the class B/C/D CMBS widen, that could add another 5 bps to loan spreads, creating higher all-in rates to borrowers when the higher 10-year swap rate is also factored in.”