New CMBS priced as single loan deals outpace conduits

Bookrunners priced a $901.17m conduit CMBS transaction late Tuesday at tight spreads, although market activity so far in 2018 has skewed further towards single borrower, single asset transactions

  • By Max Adams
  • 16 May 2018
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Bank of America Merrill Lynch, Morgan Stanley and Wells Fargo priced BANK 2018-BNK12 at 79bp over swaps for the $243.02m senior ‘A-4’ class of bonds. Final pricing for the benchmark class is 11bp tighter than the previous conduit deal to hit the market earlier this month, a $1bn transaction from Deutsche Bank.

The offering is backed by 63 commercial mortgages on 95 properties. The issuing banks will comply with risk retention by holding a vertical 5% piece of each tranche.

The first 18 weeks of the year have offered the most private label CMBS issuance since 2015. But most of the bump has come from an increase in single borrower, single asset deals.

Conduit issuance has increased slightly compared with last year, with $13.02bn sold at the end of last week, according to JP Morgan, compared with $12.03bn during the same period last year.

Single borrower deals have almost doubled, however. $11.01bn has been sold as of last week, compared with $6.39bn at this point last year.

The 32 single asset or single borrower deals well outstrips the 15 conduit transactions in the year to date, according to data from Trepp.

According to a commercial mortgage broker, CMBS execution for single borrower deals is more favorable than the rates and terms being offered by insurance company or bank balance sheet lenders.

“People have been surprised that CMBS is up this much without the supply of 10 year paper rolling over,” the broker said, referring to the low volume of 10 year CMBS loan maturities rolling in this year compared to the wave of 2007 loans that provided ample refinancing opportunities last year. “But really it's being dominated by the single asset, single borrower deals where execution seems to be much better than balance sheet lenders.”

He added that the commercial real estate CLO market is also on a noteworthy tear, with issuance of shorter duration CMBS backed by floating rate loans boosting market volumes. Other sources have said that investor demand for floating rate paper is so high that lenders are offering to refinance borrowers’ floating rate debt ahead of scheduled maturity and at a lower basis in order to churn out more CRE CLO deals.

“There are a lot of lenders out there that play in the Libor plus 350bp to 550bp space. They all have a warehouse line and they’re all thinking of doing a CLO exit,” the broker said.

On Wednesday, LoanCore Capital announced a $1.1bn CRE CLO, the largest deal of its kind so far in 2018. In the conduit segment, a $730.4m deal was also announced on Wednesday, UBS’ UBS 2018-C10.
  • By Max Adams
  • 16 May 2018

GlobalCapital European securitization league table

Rank Lead Manager/Arranger Total Volume $m No. of Deals Share % by Volume
1 Citi 4,296 9 12.14
2 BNP Paribas 3,136 11 8.86
3 Bank of America Merrill Lynch (BAML) 3,067 11 8.67
4 Lloyds Bank 2,346 10 6.63
5 Morgan Stanley 2,138 5 6.04

Bookrunners of Global Structured Finance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 45,886.98 133 11.32%
2 Bank of America Merrill Lynch 44,227.86 120 10.91%
3 Wells Fargo Securities 33,922.42 99 8.37%
4 JPMorgan 31,654.98 91 7.81%
5 Credit Suisse 24,807.99 61 6.12%