U.S. CMBS Balloon Wave

CRE Finance World, Summer 2012

U.S. CMBS Balloon Wave Russel F. Parentela Cheryl Lopez-Collins Global Head of Mortgage Product Bloomberg L.P. Bloomberg L.P. R managing $1.46 trillion of outstanding non-bank loans1. 2012 CMBS Issuance ActivityTable 1-esults from the Mortgage Bankers Association 2011Survey of Loan Maturity Volumes show that $150.6 billion of commercial and multifamily mortgages will maturein 2012. The survey responses are from loan servicers Based on Bloomberg’s CMBS Balloon Risk Analysis report, private-label commercial mortgage-backed securities (CMBS) investors will be facing $56.8 billion of loans scheduled to pay off this year. Chart 1 U.S. CMBS Issuance by Vintage and Balloon Pipeline by Maturity Year Source: Bloomberg, CMBS<GO> as of April 27, 2012 *Includes Single Asset/Single Borrower, excludes FDIC, RIAL The question that remains at the forefront of many CMBS investors’ minds is how they will be impacted by the 5-year fixed-rate term Source: Bloomberg, CMBS<GO> and BLNR<GO> as of April 24, 2012. New issue CMBS 2012 loans originated in 2007 that are coming due this year. Table 2 is year-to-date. summarizes 2012 balloons by loan term. Bloomberg estimates that about half of the fixed-rate terminated loans originated in 2007 General market sentiment is that CMBS will play a smaller role as have been liquidated or were discounted loan pay offs (DPO). Earlier a funding source for these balloons, at least in the near term. Life this year, S&P analysts Howard Esaki and James Manzi noted insurance companies and banks will play a much more active role that researchers are forecasting a pay off rate in the 20%–30% in commercial mortgage lending for 2012. Year-to-date issuance range for 5-year 2007 vintage loans3. Compound that with 5-year activity (Table 1) shows $10 billion of CMBS non-agency deals term loans from 2006 vintage that remain outstanding, and CMBS were issued, with market analysts forecasting around $30 to $40 investors are exposed to over $17 billion in loans underwritten at billion total in 2012, and may increase to $100 billion in 2015– the height of commercial property prices. In addition, borrowers 20162. In the agency market $18.7 billion of multifamily deals have of $11.5 billion for large floating-rate loans, which have either fully been issued year-to-date and is on track to potentially exceed exercised all provisions to extend their maturity or have already 2011 levels. been modified, will most likely require further extensions. CRE Finance World Summer 2012 54


CRE Finance World, Summer 2012
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