In its February CMBS Trend Watch, Kroll Bond Rating Agency (KBRA) notes that 2017 continued its sluggish start with $3.8 billion of CMBS securities priced in February. Year-to-date volume is down 48.5% from a year earlier and is the lowest it has been since 2012.
However, KBRA notes that based on the current pipeline, volume is going to pick up substantially as KBRA is aware of nine upcoming CMBS transactions. Most of the deals are expected to launch mid-March through April, including a CMBS issue from JPMorgan, a landmark deal that is the first to utilize a horizontal risk-retention structure. The JPMorgan deal follows the first use of the “L” structure last month as well as a number of deals that utilized vertical risk-retention structures.
Conduit spreads for the benchmark last cash flow (LCF) AAA-rated securities started the month of February at Swaps (S) + 88 basis points (bp), in line with the one deal that priced in January. However, the month ended slightly wider, as two deals priced at S + 94 bp and S + 95 bp. Moving in tandem with the LCF AAAs, the comparable BBB- CMBS spreads started off the month at S + 350 bp, in line with the deal that priced in January, but widened out to S+ 450 bp toward the end of the month.
After the release of the KBRA report, Goldman Sachs priced an “L” shaped structure in which it contributed all of the approximate $1.1 billion of collateral loans. Rialto Capital agreed to purchase the b-piece at a reported 18.25% yield. The benchmark LCF AAA-rated securities priced at Swaps (S) + 88 bp, reaffirming the levels achieved in January.