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from Rolfe Winkler:

MBA: CMBS deterioration continues

From the Mortgage Bankers Association:

Delinquency rates continued to increase in the third quarter for most commercial/multifamily mortgage investor groups, according to the Mortgage Bankers Association’s (MBA) Commercial/Multifamily Delinquency Report.

Here's the not-pretty chart from MBA's report:


We don’t need your stinking financing

The New York Fed reports that investors only requested financing for $72.2 million of new CMBS loans through its TALF program.  Since there’s only been one, the $400 million offering from Developers Diversified, it raises an interesting question: would investors prefer to go it alone without perceived government strings attached rather than juice returns through leverage?

Though I’m still skeptical about what this means for the billions of loans that still need to be refinanced, this is a good sign for the CMBS market and one that issuers are sure to notice. Demand is out there whether there’s nonrecourse loans or not.

The drought is (kind of) over!


After months of buildup, Developers Diversified Realty Corp finally sells the first commercial real estate bond in more than a year. At $400 million, it’s hardly a dramatic debut, but it’s a significant first for one of the few markets still jammed since the financial crisis.

From Reuters:

Met with strong investor interest, Developers Diversified was able to price the deal below existing levels for the CMBS issues. Its $323 million AAA-rated five-year notes came at a narrower 1.4 percentage point premium to the five-year interest rate swap benchmark, or a yield of 3.807 percent, market sources said.

The rock-bottom bar in CMBS

There’s a bit of a bit of buzz surrounding what could be the first CMBS deal in more than a year. Bloomberg is carrying a story about how Goldman Sachs will sell the first bond that would be eligible under the Fed’s TALF program.

But the buzz should be more about how the bar has fallen so low in commercial real estate financing.

CMBS rides again

Well, sort of.

UK supermarket retailer Tesco is planning a 559 million pound securitisation of retail stores and distribution centres.

It’s good to see some kind of CMBS market getting going in Europe given the vast amount of real estate loans that need refinancing in coming years. But, like some of the earlier deals this year, this transaction is just a very tentative toe in the water, rather than a market revival.

from Rolfe Winkler:

Chart of the day: CMBS delinquencies

The delinquency rate for commercial mortgage-backed securities continues to rise.

(Click chart to enlarge in new window)


From Moody's (no link):

Moody's ... latest CMBS Delinquency Tracker (DQT) records the aggregate rate of delinquencies among US CMBS conduit and fusion loans at 3.23%, based on data through the end of August...

A dark hour for CMBS

The last week has been a bit of a shocker for Europe’s already crumbling commercial mortgage-backed securities market (CMBS).
Investors have had to cope with steep declines in the value of their bonds and a wave of downgrades by rating agencies.

Now, to add insult to injury, there has been a jump in legal and structural issues. Bondholders are having their rights diluted over or taking on fresh liabilities they didn’t even realise they had.

The Re-REMIC limit


The repackaging of commercial real estate mortgage-backed securities made a splash in July as banks offered investors panicked by looming ratings downgrades better protection against potential losses. But, it turns out that there’s only been 9 such deals rated by Moody’s, for a total of around $1.2 billion, with Credit Swisse doing three of them.

That’s not a huge amount for a $700 billion market and I suspect the reason is there’s just not that many natural buyers for the riskier, or junior, pieces that need to be sold in a re-REMIC. Repackaging doesn’t magically make the risk go away. What it does is split an existing tranche in two so one piece is better protected while the second is worse off. Who wants to buy the worse off piece when the outlook for commercial real estate is so awful.

Commercial real estate loans grow more distressed

Realpoint, the ratings firm that specializes in bonds backed by commercial real estate properties, is out with its July delinquency report on loans in CMBS deals and it has lots of great data tidbits on the building pressure on distressed loans.

The amount of loans delinquent for three months or more – an indication of extreme distress – now stands at $11.23 billion, up from $9.57 billion in the previous month. What’s interesting about the 90-day plus delinquencies is that they’ve been rising at a much faster clip than say foreclosures and REO (when the property is turned over to the bank). Check out chart on page 9 of the full report here.

British Land’s best assets – its liabilities

British Land is in a good position to take advantage of opportunities. We know because the chairman told us. Why then, is he supposed to be contemplating selling a stake in London office complex Broadgate to Blackstone?

Given how far prices have fallen, the timing looks odd, especially for a company that claims to be in a solid financial position. However, it may make more sense than it appears to. Bank lending and property markets are soft, but the peculiarities of Broadgate’s debt structure may make it worth while for both sides.