{"id":1004102392,"date":"2014-08-19T00:00:18","date_gmt":"2014-08-19T08:00:18","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004102392"},"modified":"2022-12-05T23:40:00","modified_gmt":"2022-12-06T07:40:00","slug":"fitch-reports-early-refinances-up-for-u-s-cmbs-2-0","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/fitch-reports-early-refinances-up-for-u-s-cmbs-2-0\/","title":{"rendered":"Fitch Reports Early Refinances Up for U.S. CMBS 2.0"},"content":{"rendered":"

By Keith Loria, Contributing Editor<\/em><\/p>\n

\"Huxley

Huxley Somerville, Managing Director and CMBS Group Head, Fitch Ratings<\/p><\/div>\n

The commercial mortgage-backed securities (CMBS) market is robust, according to the latest report from Fitch Ratings, which notes it continues to see strong take-out activity in CMBS 2.0 collateral.<\/p>\n

Recent data shows that approximately $48.4 billion has been issued in 2014, with $24.8 billion since June. Fitch also notes that borrowers are often paying the premium of yield maintenance to take advantage of the persistently low interest rate environment.<\/p>\n

\u201cThere\u2019s a lot of capital available for mortgage loans. They are performing strongly, as expected,\u201d Huxley Somerville, Fitch Ratings\u2019 U.S. CMBS group head, told Commercial Property Executive<\/i>. \u201cRight now, the market is very strong because there is a lot of liquidity. There is also a lot of competition to provide that liquidity to borrowers, which is causing competition among originators to make the loans, and the standards have declined somewhat.\u201d<\/p>\n

According to the report, Fitch has seen a growing number of prepayments and an increase in the size of individual loans being prepaid during 2014 when compared to the prior three years.<\/p>\n

\u201cWhat\u2019s happening is that the loans made several years ago were made on more of a conservative basis than today, and today you have value increases\u2014purely a result of the market\u2014and a stronger cash flow than a couple of years ago,\u201d Somerville said. \u201cPeople with the opportunity to prepay loans are doing the rational thing, as they can get more debt proceeds on a new loan today, thus getting more dollars to secure against property.”<\/p>\n

It\u2019s something that Somerville said is not a cause for concern at the moment.<\/p>\n

The report shows that to date, 2014 has seen 23 prepayments (totaling $2.7 billion, with balances ranging from $1.5 million to $1 billion). This is a notable difference from the five loans from a single transaction with individual loan balances all below $6 million that occurred during 2011.<\/p>\n

Additionally, Fitch reported 49 prepaid loans, 33 of which were prepaid with yield maintenance or with a premium and 16 that were prepaid at no additional cost, as they were in their freely pre-payable period.<\/p>\n

\u201cIn addition to an uptick in CMBS 2.0 defeasance, early payoffs are emerging, some of which are taking place shortly after expiration of the lock-out period,\u201d Somerville added. \u201cBorrowers are often paying the premium of yield maintenance to take advantage of the persistently low interest-rate environment.\u201d<\/p>\n

The added costs associated with these pre-pays and defeasance are offset by the increased debt available due to net operating income growth, value appreciation and the often lower interest rate than that of the original loan.\u00a0Such cash-outs raise the question of sustainability should we be nearing peak performance in certain markets and asset types.<\/p>\n

Looking ahead, Somerville said Fitch expects to see a back-ended supply of CMBS. Toward the end of the year, that would mean more supply due to the refinancing that will start to occur in the third and fourth quarters.<\/p>\n

\u201cOne trend that is really interesting and seems to be getting more extreme is the picking and choosing of rating agencies and different rating categories,\u201d he said. \u201cThat\u2019s a cause for concern, and I think investors are concerned of that occurring. That\u2019s something that needs to be watched with interest.\u201d<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

The CMBS market is robust, according to the latest report from Fitch Ratings, which notes it continues to see strong take-out activity in CMBS 2.0 collateral.<\/p>\n","protected":false},"author":451,"featured_media":1004102394,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21825,37753],"tags":[],"class_list":["post-1004102392","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","category-research-center-finance"],"acf":[],"yoast_head":"\nFitch Reports Early Refinances Up for U.S. CMBS 2.0 - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/fitch-reports-early-refinances-up-for-u-s-cmbs-2-0\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Fitch Reports Early Refinances Up for U.S. CMBS 2.0\" \/>\n<meta property=\"og:description\" content=\"The CMBS market is robust, according to the latest report from Fitch Ratings, which notes it continues to see strong take-out activity in CMBS 2.0 collateral.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/fitch-reports-early-refinances-up-for-u-s-cmbs-2-0\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2014-08-19T08:00:18+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-12-06T07:40:00+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2014\/08\/Huxley-Somerville_feature.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"500\" \/>\n\t<meta property=\"og:image:height\" content=\"281\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Keith Loria\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/fitch-reports-early-refinances-up-for-u-s-cmbs-2-0\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/fitch-reports-early-refinances-up-for-u-s-cmbs-2-0\\\/\"},\"author\":{\"name\":\"Keith Loria\",\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/#\\\/schema\\\/person\\\/aaa29b723dad85f2444ae3cb0c4d735f\"},\"headline\":\"Fitch Reports Early Refinances Up for U.S. CMBS 2.0\",\"datePublished\":\"2014-08-19T08:00:18+00:00\",\"dateModified\":\"2022-12-06T07:40:00+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/fitch-reports-early-refinances-up-for-u-s-cmbs-2-0\\\/\"},\"wordCount\":557,\"commentCount\":0,\"image\":{\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/fitch-reports-early-refinances-up-for-u-s-cmbs-2-0\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/wp-content\\\/uploads\\\/sites\\\/46\\\/2014\\\/08\\\/Huxley-Somerville_feature.jpg\",\"articleSection\":[\"Finance\",\"Finance (Research Center)\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/fitch-reports-early-refinances-up-for-u-s-cmbs-2-0\\\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/fitch-reports-early-refinances-up-for-u-s-cmbs-2-0\\\/\",\"url\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/fitch-reports-early-refinances-up-for-u-s-cmbs-2-0\\\/\",\"name\":\"Fitch Reports Early Refinances Up for U.S. CMBS 2.0 - 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