The issuance of domestic, private-label commercial mortgage-backed securities (CMBS) totaled $5.98 billion during the first quarter of this year, according to data from Trepp LLC. This is down by 12% from the fourth quarter of 2022 and a 79% plummet from the first quarter of 2022.
“You will have to go back to the first quarter of 2012, as the economy was pushing out of the Global Financial Crisis, to see such lackluster issuance volume. Issuers were stymied every step of the way – when they wrote loans and when they tried selling them as bonds,” said Orest Mandzy, managing editor at Trepp’s Commercial Real Estate Direct. “Increasing interest rates wreaked havoc on their ability to profitably originate loans. And increasing bond spreads further worked against them.”
Mandzy reported there were only four conduit deals priced during the first quarter, with two of these deals backed solely by loans with five-year terms.
“Single-borrower transactions plunged in volume to six deals totaling $2.7 billion from 26 deals totaling $18.61 billion a year ago,” he continued. “The CRE CLO market basically ground to a halt, as only two deals totaling $1.12 billion were issued during the first quarter. During last year’s first quarter, 13 deals totaling $15.27 billion were issued. Property owners had become reluctant to place 10-year loans against their properties, convinced that interest rates would eventually decline.”
Last week, Trepp reported its CMBS Delinquency Rate was 3.09% in March, fueled primarily by declines in retail delinquency activity. However, the office market saw a rise in delinquencies during themonth.
“The tone has gotten decidedly worse over the last three months as some big office loans (held by big property owners) have defaulted and/or been sent to special servicing,” observed Manus Clancy, senior managing director at Trepp. “In addition, a tightening of credit conditions in CMBS and with bank lending has made capital even more scarce.”
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