CMBS

Blackstone Group may have to offer more yield on its $7.4 billion commercial mortgage-backed securities in early June to boost investor confidence in its stand-alone deal, according to Reuters. Unlike the conduit structure of Wachovia Securities’ $7.9 billion issue, which involved multiple loans and borrowers, Blackstone-EOP’s transaction includes a single borrower, raising investor exposure in just one name. As a result, it is likely to require additional yield spread from investors, analysts said.

In the three weeks since the rating agencies began tightening their credit standards on new commercial mortgage-backed securities deals, market participants are saying that the impact is already being felt.

The first project finance securitization in the Gulf region could hit the market by the end of the year and is being originated and arranged by Sumitomo Mitsui Banking Corporation Europe.

Merrill Lynch is lead-managing and arranging a £750 million ($1.47 billion) commercial mortgage-backed securitization that helps refinance the acquisition of four CenterParcs holiday villages in the U.K. by the Blackstone Group.

Aggressive underwriting will lead to increased defaults in the latest crop of loans earmarked for commercial mortgage-backed securities, warns Fitch Ratings, according to the National Real Estate Investor. The chief cause for concern is a reliance on continued property price appreciation to achieve positive cash flow. “Experience has taught us that continuously upward-trending rents and real estate values aren't guaranteed,” said Zanda Lynn, managing director at Fitch Ratings. “In the overly optimistic view of the market, future corrections or economic fluctuations are not contemplated.”

The European securitisation market was flooded with CMBS this week as two more deals entered the pipeline to replace Business Mortgage Finance No 6 and Stability CMBS 2007-1, which were priced this week.

New York-based Marathon Real Estate Finance, which was formed to invest in mortgages and other property debt, plans to raise as much as $200 million in an initial public offering and will use the proceeds to start a portfolio of loans, according to Bloomberg. The firm plans to originate, acquire and invest in commercial real estate finance transactions, including whole mortgages, mezzanine loans, commercial mortgage-backed securities and other investment vehicles, the company said in a filing with the Securities and Exchange Commission. Marathon Real Estate is managed by New York-based Marathon Asset Management, a real estate and debt management company that was formed in 1998 and has about $20 billion in assets.

An AUD$250 million ($208 million) Australian commercial mortgage-backed securities deal that securitizes loans originated by New South Wales-based lender IMB is in the market.

Price guidance was issued for three very different CMBS in the market this week, giving investors a chance to pick and choose.