{"id":1004564379,"date":"2022-01-26T19:47:08","date_gmt":"2022-01-27T03:47:08","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004564379"},"modified":"2022-12-08T19:08:03","modified_gmt":"2022-12-09T03:08:03","slug":"will-2022-be-another-boom-year-for-cmbs","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/will-2022-be-another-boom-year-for-cmbs\/","title":{"rendered":"Will 2022 Be Another Boom Year for CMBS?"},"content":{"rendered":"

In its November CMBS outlook, KBRA noted that the delta variant was subsiding, the economy was improving and commercial real estate was recovering. The company forecast commercial real estate securitizations to be between $150 billion and $165 billion this year.<\/p>\n\n\n

\n
READ THE GUIDE<\/a><\/div>\n<\/div>\n\n\n

In a January podcast, Trepp<\/strong> executives shared a positive economic forecast, with inflation, supply-chain issues and low labor force participation likely to be resolved. The firm also stated, however, that omicron accounted for the majority of COVID infections and that there were signs of turmoil in the office sector. For example, the CMBS delinquency rate for office properties rose in December by 72 basis points over the previous month.<\/p>\n

\"\"<\/a>

Zachary Samton<\/p><\/div>\n

Yet there\u2019s ample reason for optimism about CMBS in the coming year, particularly since improving property markets, low interest rates, and low interest rates  pushed issuance last year to $110 billion, according to Trepp. That\u2019s about double 2020\u2019s $54.2 billion and the most issued since 2007 when $230 billon was issued. <\/p>\n

\u201cI think it\u2019s going to be a good year for CMBS, if you have good sponsors and good products,\u201d suggested Zachary Samton, co-chair of real estate finance at Cozen O\u2019Connor, noting CMBS offers better loan-to-value than many other borrowing options. \u201cThe bond buyers will continue to be there.\u201d<\/p>\n

Further, in a year-end 2021 report, Trepp\/Commercial Real Estate Direct highlighted an ongoing decline in CMBS delinquencies since they peaked in June 2020, at $54.29 billion (or 10.32 percent of the then CMBS universe). As of the end of November, the report stated, just $24.53 billion in loans (4.4 percent of the universe), were classified as at least 30 days late with debt-service payments.<\/p>\n

In parallel to that, special servicing volume declined by 27 percent, in what Trepp labeled a \u201cyear of recovery.\u201d Through November, the total of CMBS loans in special servicing was $38.73 billion (6.95 percent of $558.13 billion) vs. $55.75 billion (9.81 percent of $539.48 billion) at the start of 2021, according to Trepp data.<\/p>\n

\u201cYou\u2019d think there would be more blood in the water, but there isn\u2019t,\u201d remarked Gabriel Silverstein, managing director of SVN|Angelic<\/strong> and chair of SVN\u2019s Institutional Capital Markets group.<\/p>\n

Return to Office. Or Not Yet?<\/h2>\n
\"\"<\/a>

Gabriel Silverstein<\/p><\/div>\n

What would really reduce those delinquencies, at least in the office sector, would be the much-discussed return to the office, which had been widely expected to start at the beginning of the new year but was short-circuited by omicron. But despite the uncertain horizon for office properties, about $30 billion of office-property loans were securitized last year, with most being large single-asset\/single-borrower transactions. (SASBs accounted for a surprising $77.7 billon of the total $110 billion of CMBS in 2020 vs. $24 billion in 2020, according to Trepp. Conduits were steady at $30 billion of the volume.) <\/p>\n

\u201cThere\u2019s going to be a return to the office,\u201d insisted Rich Highfield, head of CMBS lending at Greystone<\/strong>, adding that he expects office users to require more space than previously.<\/p>\n

He also sees opportunities for CMBS in other COVID-sensitive sectors, like hotels. \u201cWe are approaching a time when people get tired of following all the rules,\u201d he continued.  <\/p>\n

Silverstein agrees that COVID fatigue is real, and that, at some level, CMBS becomes \u201cnumb\u201d to the ongoing pandemic news. One residual effect of the pandemic in the near term, however, he believes, will probably be shorter-term lease renewals.<\/p>\n

Not everything<\/em> is affected by COVID. \u201cManufacturing and industrial has held up quite well,\u201d Samton pointed out. \u201cSelf storage is very hot.\u201d<\/p>\n

Multifamily is also doing very well, while hospitality might see a rebound in the spring and best-in-class retail assets will do fine, he noted.<\/p>\n

Besides, over a typical five- to seven-year lending time frame, better vaccines and therapeutics will certainly be available, making it less likely that COVID will be a long-term factor in commercial real estate, Samton stated.<\/p>\n

When the Fed Stops the Music<\/h2>\n
\"\"<\/a>

Rich Highfield<\/p><\/div>\n

For many, the Federal Reserve is more concerning than COVID. \u201cWhat I worry about more than COVID is an environment of rising rates,\u201d Samton commented, noting higher rates may result in more CMBS activity in the first half of this year than the second half. But the Fed may start raising rates as early as March.<\/p>\n

Loan maturities are another challenge.  As a CMBS lender, Greystone is generally financing 10-year loans, so currently the 2011 and 2012 loans are reaching maturity. In addition, two- or three-year bridge loans have been very common over the past four to five years, as have CLOs.<\/p>\n

\u201cThere\u2019s a good quantity of loans to weed through,\u201d Highfield explained.<\/p>\n

Loans coming up will have significant amortization, with many between 17 percent and 19 percent amortized. But if a tenant has only 5 percent of its employees sitting at desks, that could be problematic. \u201cIt\u2019s going to take a lot of manual labor,\u201d noted Highfield.<\/p>\n

A Better-Securitized Product<\/h2>\n
\"\"<\/a>

Manus Clancy<\/p><\/div>\n

In a recent podcast, Trepp Senior Managing Director Manus Clancy noted that \u201c2021 felt a lot like 2005,\u201d in terms of factors like price appreciation, compression in lending spreads and cap rates, and rising commercial real estate securitization activity.<\/p>\n

\u201cSo the question is,\u201d he continued, \u201care we at the start of a cycle that will ultimately lead to more pain, or will this time be different?\u201d<\/p>\n

But there are distinct differences, also.<\/p>\n

\u201cThe market is starting from firmer footing,\u201d he contended. \u201cFor the most part, lending discipline has held up, leverage has remained range-bound for CMBS loans, and post-GFC deal structures protect CMBS buyers with considerably more subordination protection.\u201d<\/p>\n

Others agree that CMBS 2.0 is just a stronger product than what existed before 2008-09. \u201cThere\u2019s a lot more market-driven policing \u2026 we\u2019ve never gotten back to 80 percent LTV on pro forma numbers,\u201d said Silverstein. \u201cCMBS has kind of grown up.\u201d  <\/p>\n

Looking ahead, Silverstein says 2022 is likely to be the best CMBS year in a decade, in terms of dollar value of new issuances.<\/p>\n

At the end of 2020, Highfield was asked for his CMBS forecast for 2021. He predicted between $80 billion and $90 billion, but it turned out to be about $110 billion. Right now, his 2022 forecasts range from $90 billion to $140 billion, and the average is $117.6 billion.<\/p>\n

Read the February 2022 issue of CPE.<\/em><\/a><\/p>","protected":false},"excerpt":{"rendered":"

Investor interest remains high, but looming factors could impede volume.<\/p>\n","protected":false},"author":882,"featured_media":1004564753,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1521,21825],"tags":[35826,37260,32855,33330,35305],"class_list":["post-1004564379","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-digital","category-finance","tag-cmbs","tag-cozen-oconnor","tag-greystone","tag-svn","tag-trepp-inc"],"acf":[],"yoast_head":"\nWill 2022 Be Another Boom Year for CMBS? - Commercial Property Executive<\/title>\n<meta name=\"description\" content=\"Investor interest in CMBS bonds remains high, but some looming factors in commercial real estate could impede issuance volume.\" \/>\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\/will-2022-be-another-boom-year-for-cmbs\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Will 2022 Be Another Boom Year for CMBS?\" \/>\n<meta property=\"og:description\" content=\"Investor interest in CMBS bonds remains high, but some looming factors in commercial real estate could impede issuance volume.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/will-2022-be-another-boom-year-for-cmbs\/\" \/>\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=\"2022-01-27T03:47:08+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-12-09T03:08:03+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2022\/01\/Finance-Image-by-wildpixel-iStock-611749554.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"900\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Scott Baltic\" \/>\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\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/will-2022-be-another-boom-year-for-cmbs\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/will-2022-be-another-boom-year-for-cmbs\/\",\"name\":\"Will 2022 Be Another Boom Year for CMBS? 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