Investors Bet Against CMBS As Retail Weakens, But Retailers Are Fighting Back

Investors Bet Against CMBS As Retail Weakens, But Retailers Are Fighting Back

Retailers have been suffering since the rise of Amazon (NASDAQ:AMZN). Now retail’s weakness is infecting the commercial mortgage-backed securities market. 

There is a growing trend of investors making a series of bets against some of the riskier parts of the CMBS market, largely due to its connection to struggling retailers. In fact, in February Deutsche Bank AG said that it was time to bet against CMBS. Yet despite the enormity of the challenges facing the sector, mall landlords and retailers are taking steps to reverse the trend.

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5 LARGEST CMBS LOAN LOSSES - MARCH 2017

5 LARGEST CMBS LOAN LOSSES - MARCH 2017

The recent trend of high monthly disposition volumes continued in March as 73 CMBS loans totaling $1.5 billion were liquidated last month, the highest such volume in 15 months. Due to the resolution of several large office and retail notes, average loan size remained elevated at $20.5 million, up slightly from $20.4 million in February. Overall loss severity ticked down for the third straight month, falling to an average loss rate of 32.17% in March from 48.76% in February, and a recent high of 57.83% in January.

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CMBS Delinquency Rate on the Rise

CMBS Delinquency Rate on the Rise

The delinquency rate for U.S. commercial real estate loans in commercial mortgage-backed securities (CMBS) reached 5.31 percent in February, an increase of 13 basis points from the previous month, according to data from Trepp LLC. The rate is now 116 basis points higher than the year-ago level of 4.15 percent, which was a multi-year low.

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The CMBS Wall of Maturities—Cracking the CMBS Code

The CMBS Wall of Maturities—Cracking the CMBS Code

Let’s take a walk down commercial real estate memory lane. In 2007, life was good, you had a nice project throwing off good cash flow, cap rates were low, values were high and you hit the jackpot! You refinanced, you maxed out proceeds, you got cheap, fixed-rate, 10-year money. Heck, you may have even repaid your equity!

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What bubble? JPMorgan’s CMBS desk doubles down on construction lending

What bubble? JPMorgan’s CMBS desk doubles down on construction lending

JPMorgan’s CMBS trading desk quietly emerged as a major construction lender in Greater New York, taking a leading role in at least $2.7 billion in loans in recent years.

The increased lending activity by the bond group comes as the bank’s commercial banking unit, which usually issues construction loans, is growing more cautious on riskier real estate financing.

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