News Archive

News

Capital Markets Update Week of 4/8

April 9, 2024

Private-Label CMBS and CRE CLOs

  • Two private-label transactions totaling $1.1 billion priced last week:

- HTL 2024-T53, a $631.5 million SASB backed by a three-year, fixed-rate loan for MCR Hotels and Building and Land Technology (BLT) to refinance 53 hotels totaling 5,958 rooms across 14 states

- BX 2024-BRVE, a $428.5 million SASB backed by a floating-rate, five-year loan (at full extension) for Blackstone Real Estate Income to refinance 23 hotels totaling 4,002 rooms across 10 states

  • According to Commercial Mortgage Alert, three additional SASB transactions are in the market and are expected to price this week.
  • Year-to-date private-label CMBS and CRE CLO issuance totaled $20.5 billion, well ahead of the $7.8 billion for the same period last year.

Spreads Steady

  • Conduit AAA and A-S spreads were unchanged at +88 and +130, respectively. YTD, AAA and A-S spreads have tightened 28 bps and 35 bps, respectively.
  • Conduit AA and A spreads were unchanged at +150 and +250, respectively. YTD, they have tightened by 75 bps and 125 bps, respectively.
  • Conduit BBB- remained at +675. YTD, BBB- spreads have tightened by 225 bps.
  • SASB AAA spreads were also unchanged, ranging from +136 to +160, depending on property type. They narrowed from +160 to +188 at the start of the year.
  • CRE CLO AAA spreads held at +160 / 165 (Static / Managed), and BBB- spreads at +650 (Static / Managed). For the year, spreads are tighter by 40 / 35 bps and 50 bps, respectively.

Agency CMBS

  • Agency issuance totaled $2 billion last week, consisting of $1.4 billion in Freddie-K and Multi-PC transactions, $475.8 million in Fannie DUS, and $83.1 million in Ginnie transactions.
  • Agency issuance for the year is $25.8 billion, 4% lower than the $26.8 billion for the same period last year.

The Economy, the Fed, and Rates…

Economic Data:

  • The economy added 303,000 jobs in March, blowing past economists' forecasts of ~200,000. The unemployment rate edged down to 3.8%, as a separate survey showed 469,000 new entrants into the labor force. The labor participation rate climbed and, at 62.7%, is now above where it was a year ago.
  • Notable job gains were observed in healthcare, leisure and hospitality, construction, and government. Average weekly earnings and the number of hours worked both showed positive trends, underlining the upward pressure on wages amid a competitive job market.
  • Steadier goods spending and lower cost inflation seem to have relieved pressure on manufacturing. Last week’s ISM purchasing managers’ index confirmed that manufacturing returned to modest expansion in March after 16 months of contraction.
  • In cycles since 1951, ISM manufacturing surveys have never shrunk for more than 14 months without a recession. Manufacturing leaving contraction removes one of the economy’s last few soft spots.

Fed Policy:

  • The March jobs report underscored the robustness of the labor market, challenging the immediate necessity for Fed rate cuts and leading to a reassessment of the economic outlook among investors and policymakers.
  • According to futures markets, market anticipation of Fed rate cuts shifted significantly, with the probability of a rate reduction by June dropping from 66% to about 50%.
  • Federal Reserve officials, including Chair Jay Powell and Dallas Fed President Lorie Logan, signaled a cautious stance toward cutting interest rates amidst a robust labor market and inflationary pressures. They emphasized the need for more evident signs of inflation moving toward the Fed's 2% target.
  • Analysts and economists will closely monitor upcoming economic data, especially CPI figures, to gauge the Fed's policy direction. A consensus is leaning towards eventual rate reductions but diverging on the timing and magnitude.

Treasury Yields:

  • Bond yields rose after the release of the strong jobs data as investors scaled back bets that the Fed would cut interest rates soon. The two-year Treasury yield was up 13 bps on the week to 4.75%, while the 10-year was up 20 bps to 4.40%, its highest level since November.

You can download CREFC’s one-page MarketWatch with statistics covering the economy and the CRE debt capital markets here.

Contact Raj Aidasani (raidasani@crefc.org) with any questions.

Contact 

Raj Aidasani
Managing Director, Research
646.884.7566

N/A
The information provided herein is general in nature and for educational purposes only. CRE Finance Council makes no representations as to the accuracy, completeness, timeliness, validity, usefulness, or suitability of the information provided. The information should not be relied upon or interpreted as legal, financial, tax, accounting, investment, commercial or other advice, and CRE Finance Council disclaims all liability for any such reliance. © 2023 CRE Finance Council. All rights reserved.
Capital Markets Update Week of 4/8
April 09, 2024
Private-Label CMBS and CRE CLOs

News

Congressional Outlook  

April 9, 2024

The House and Senate are back this week from a two-week recess after funding the government.

What’s next: While the risk of a shutdown is no longer imminent, several difficult issues will confront lawmakers over the next few months. Senate Majority Leader Chuck Schumer (D-N.Y.) outlined his priorities in a Dear Colleague Letter last week.

  • Action on Ukraine funding is a top priority for many Democrats and Republicans, and while Speaker Johnson is supportive of Ukraine funding, action on it might prompt his ouster. More on this below.
  • The Foreign Intelligence Surveillance Act (FISA) expires on April 19 and progressive and conservative critics have demanded changes to FISA they claim will protect Americans. Proponents of FISA argue that some proposed changes will hamstring surveillance of foreign terrorists and adversaries.
  • Federal Aviation Administration (FAA) reauthorization is needed by May 10.
  • Funding to rebuild the Francis Scott Key Bridge in Baltimore could run into some partisan roadblocks.
  • Homeland Security Secretary Alejandro Mayorkas’ impeachment trial will likely begin Thursday. The Senate is unlikely to reach the 67-vote threshold needed to convict and remove him.
  • Additional Senate priorities include the bipartisan tax bill, the TikTok divestment bill, and appropriations for FY 2025.

Over in the House, Speaker Johnson is expected to take action on Ukraine funding, though it’s not clear how. The Senate-passed national security supplemental that packages Ukraine, Israel, and Taiwan funding is the quickest path, as any changes would have to be reapproved by the Senate and face procedural delays by opponents.

  • Johnson has floated other options for Ukraine funding, including forgivable loans, in an attempt to compromise with GOP opponents of additional spending.
  • Israel funding may come under additional scrutiny and opposition in the wake of the accidental killings of seven World Central Kitchen aid workers by Israeli forces.
  • Any action on Ukraine will likely prompt action on a motion to vacate Speaker Johnson, which Rep. Marjorie Taylor Greene (R-GA) filed on March 22. Democrats are expected to save Johnson, though the situation is fluid. See the “Retirements” article below for more details.

Contact David McCarthy (dmccarthy@crefc.org) with questions.

Contact 

David McCarthy
Managing Director, Head of Policy
202.448.0855
dmccarthy@crefc.org


Congressional focus on Ukraine funding will be a major topic as Congress returns. 

 
The information provided herein is general in nature and for educational purposes only. CRE Finance Council makes no representations as to the accuracy, completeness, timeliness, validity, usefulness, or suitability of the information provided. The information should not be relied upon or interpreted as legal, financial, tax, accounting, investment, commercial or other advice, and CRE Finance Council disclaims all liability for any such reliance. © 2023 CRE Finance Council. All rights reserved.
Congressional Outlook
April 09, 2024
The House and Senate are back this week from a two-week recess after funding the government.

News

House Retirements in Focus

April 9, 2024

Members of Congress are retiring at rates comparable to other cycles, but in this election cycle some lawmakers are making their exits a bit earlier than 2025.

What’s happening:

  • Rep. Ken Buck (R-CO): The Congressman from Colorado’s 4th district announced his retirement last November but resigned on March 23.
  • Rep. Mike Gallagher (R-WI) announced in early February that he would be retiring from the House at the end of his term. He then clarified that his last day would be on Friday, April 19.

Why this timing raised a few eyebrows:

  • If Gallagher had left the House just ten days earlier on April 9th, there would have been a special election to fill his seat as required by Wisconsin law. However, since he left after April 9th, the seat will stay vacant until November.
  • Rep. Gallagher has openly expressed frustration with his party about how they have been governing. Recently, he stated he wouldn’t commit to attending the party’s convention this summer.
  • The seat likely will stay in Republican hands come November, but candidates from both parties have declared interest in running for Wisconsin’s 8th Congressional District.

What this all means for Speaker Johnson and the Republicans:

The House is currently divided at 218-213 with four vacancies, which provides a challenge for Speaker Johnson who needs a two-vote majority.

  • When Rep. Gallagher officially departs on April 19, the majority will drop to one vote, a narrow margin not seen since 1919.
  • Speaker Johnson will have to contend with the motion to vacate from Rep. Marjorie Taylor Greene. The motion could be brought up as soon as Tuesday, April 9.

What they're saying: Rep. Greene contends that Speaker Johnson’s compromise with Democrats to keep the government open last month and his intention to bring additional Ukraine aid to the floor are reason enough to boot him from his post.

  • However, some Democrats have promised that if Speaker Johnson brings Ukraine aid to the floor they will protect him and table Rep. Greene’s motion.

When this margin won’t matter: Three special elections will take place between May 21 and June 25, which will likely add to the GOP majority.

If all these elections break for Republicans, as expected, Speaker Johnson will have a larger margin, though the fractious GOP conference will continue to create challenges for party leadership as votes on foreign aid and other program reauthorizations loom.

The bottom line: There may only be 81 legislative days left in the 118th Congress but there’s still time for additional precedents to be set, as Speaker Kevin McCarthy’s ouster was a first.

  • The government is only funded through September 30 and legislators will once again need to agree to take action for FY 2025 or risk a shutdown.
  • The 2024 election 209 days from today.

Please contact James Montfort (jmontfort@crefc.org) with any questions.

Contact 

James Montford
Manager, Government Relations
202.448.0857
jmontfort@crefc.org

Midterm elections countdown calendar
The information provided herein is general in nature and for educational purposes only. CRE Finance Council makes no representations as to the accuracy, completeness, timeliness, validity, usefulness, or suitability of the information provided. The information should not be relied upon or interpreted as legal, financial, tax, accounting, investment, commercial or other advice, and CRE Finance Council disclaims all liability for any such reliance. © 2023 CRE Finance Council. All rights reserved.
House Retirements in Focus
April 09, 2024
Members of Congress are retiring at rates comparable to other cycles, but in this election cycle some lawmakers are making their exits a bit earlier than 2025.

News

SEC Pauses Its Own Climate Disclosure Rule

April 9, 2024

The Securities and Exchange Commission (SEC) on April 4 issued a stay on its March 6 climate disclosure rulemaking. This unusual move comes in response to the multiple lawsuits brought against this rule since its promulgation.

As noted in previous CREFC Policy and Capital Markets Briefings, the SEC’s climate regulation is highly controversial despite having been significantly revised since the initial proposal.

Since March 6, nine lawsuits have been filed:

  • Two lawsuits were filed by progressive organizations, including the Sierra Club and the Natural Resources Defense Council, claiming the final rule had been excessively scaled back from its proposed form.
  • Seven suits, including those filed by energy companies and Republican-led states, have argued that the rule violates the First Amendment and fails the major questions doctrine.

Claims have now been consolidated in the Eighth Circuit Court of Appeals pending litigation.

What they’re saying: The SEC said it would continue "vigorously defending" the rules, which are “consistent with applicable law and within the Commission’s long-standing authority.”

However, the SEC also noted that:

“A stay avoids potential regulatory uncertainty if registrants were to become subject to the Final Rules’ requirements during the pendency of the challenges to their validity.”

What this means: The stay does not mean that organizations should stop preparing for climate-related disclosures.

In the two years since the SEC issued the proposal, its climate disclosure requirements have been eclipsed in stringency by other key entities, including the state of California, the EU, and the International Sustainability Standards Board. Many investors are also seeking greater climate disclosures.

The bottom line: Regardless of where we land with final SEC climate disclosures, organizations should continue to monitor climate disclosure requirements and ensure they will be able to meet applicable regulations.

What’s next: CREFC continues to closely monitor these regulatory and judicial developments and will keep membership apprised.

Please contact Sairah Burki at sburki@crefc.org with any questions.
 

Contact 

Sairah Burki
Managing Director, Regulatory Affairs
703.201.4294
sburki@crefc.org
yellow traffic light
The information provided herein is general in nature and for educational purposes only. CRE Finance Council makes no representations as to the accuracy, completeness, timeliness, validity, usefulness, or suitability of the information provided. The information should not be relied upon or interpreted as legal, financial, tax, accounting, investment, commercial or other advice, and CRE Finance Council disclaims all liability for any such reliance. © 2023 CRE Finance Council. All rights reserved.
SEC Pauses Its Own Climate Disclosure Rule
April 09, 2024
The Securities and Exchange Commission (SEC) on April 4 issued a stay on its March 6 climate disclosure rulemaking.

News

Foreign Investment Legislation Sent to Georgia Governor; Notarization Bill Fails

April 9, 2024

As we have previously covered, the Georgia state legislature has been considering legislation that, if enacted, could have major implications for CRE attorneys and investments. The legislature adjourned March 28:

  • Limitations on foreign ownership and investment in real estate passed and were sent to the Governor (SB 420).
  • Closing procedures and remote notarization changes did not pass (SB 425).

Why it matters: The limitation on foreign investment and ownership in real estate follows the trend of 15 other states that have enacted similar provisions, most notably Florida SB 264.

CRE Closings and Remote Online Notarization: As proposed, Georgia SB 425 could have impacted the processes by which attorneys handle commercial real estate closings, including, but not limited to, multi-state, multi-property transactions. The bill also included criminal penalties for closing attorneys in the defined circumstances of this bill.

  • The Senate passed the bill 51-4, but the House did not act on the legislation before it adjourned.

Limitations on Foreign Investment in Real Estate: Georgia’s HB 1093 and SB 420 bills are part of a wave of legislation being proposed throughout the nation (including Florida) that aims to impose “restrictions on foreign investment in real estate.” SB 420 was passed by both chambers and sent to Governor Brian Kemp (R-GA), who has not yet signed the bill.

  • The bill would prohibit a “nonresident alien” of a foreign adversary from acquiring directly or indirectly any possessory interest in agricultural land or land within a ten-mile radius of any military base, military installation, or military airport. The definitions would also include U.S. legal entities with at least 25% of their ownership comprising “nonresident aliens.”
  • Criminal felony penalties could apply to persons facilitating transactions that violate the law, including commercial closing attorneys.
  • The federal government’s Committee on Foreign Investment in the United States (CFIUS) includes a review of foreign ownership of real estate near sensitive sites. State legislation could complicate this review process.

What's next: If Gov. Kemp signs the bill, it will likely face challenges in federal court.

For more information or to get involved, contact David McCarthy (dmccarthy@crefc.org)

Contact 

David McCarthy
Managing Director, Head of Policy
202.448.0855
dmccarthy@crefc.org
Farmland cross-section with a Chinese flag under it.
The information provided herein is general in nature and for educational purposes only. CRE Finance Council makes no representations as to the accuracy, completeness, timeliness, validity, usefulness, or suitability of the information provided. The information should not be relied upon or interpreted as legal, financial, tax, accounting, investment, commercial or other advice, and CRE Finance Council disclaims all liability for any such reliance. © 2023 CRE Finance Council. All rights reserved.
Foreign Investment Legislation Sent to Georgia Governor; Notarization Bill Fails
April 09, 2024
As we have previously covered, the Georgia state legislature has been considering legislation that, if enacted, could have major implications for CRE attorneys and investments.

News

CREFC's February 2024 Monthly CMBS Loan Performance Report

March 28, 2024

CRE Finance Council has released a report on CMBS loan performance for February.*

Key takeaways:

DELINQUENCY RATE SLIGHTLY UP IN FEBRUARY


  • Conduit/SASB CMBS combined delinquency of 4.71%
    • Delinquency rate rose 5 bps in February, following a jump of 15 bps in the month prior
    • On a YOY basis, the overall combined delinquency rate is up 159 bps (4.71% vs. 3.12% in February 2023)
  • Delinquencies in the heavily watched office sector experienced another large increase in February
    • Office delinquency rate jumped 33 bps to 6.63% in February, following a move of 48 bps in the prior month, and is 425 bps higher on a YOY basis
    • Convergence of work-from-home (WFH)-induced demand shock, high benchmark, mortgage, and cap rates, and a pullback in bank lending will continue to present office headwinds
  • Delinquency rate is still 561 bps below 10.32% peak in June 2020 – the height of pandemic-related lockdowns. Clearly, the situation today with limited office demand and higher rates suggests perhaps a less benign outcome for certain office loans.
  • Loans in special servicing (SS) rose to 7.14% in February; up 19 bps from prior month and 196 bps higher on a YOY basis
    • As per servicers, loans transferring to SS mostly related to current market dynamics; office loans dominate new entries
    • Servicers say most loans with COVID-related forbearances have returned to original loan terms and are performing as expected
    • Loans still in forbearance or modified are generally paying as required
  • Delinquency and SS rates for SASB continue to climb
    • SASB delinquency rate of 4.17% in February vs. 1.86% in year prior; SASB SS rate of 7.15% vs. 4.29% in year prior. SASB distress driven by floating-rate loans challenged with securing new interest-rate cap and swap agreements at higher strike rates and continued challenges in the office sector (much of which is financed by SASB CMBS).
    • Conduit delinquency has also climbed but at more measured pace: 5.08% delinquency vs. 3.97% in year prior; 7.14% SS vs. 5.78% in year prior
  • Loans in-foreclosure and REO asset rates remain low at 1.22% and 0.87%, respectively
    • Office delinquency and SS rates will continue to increase as more loans with near-term maturity dates have difficulty refinancing; foreclosure and REO rates expected to trend upward as a result

*Source: Trepp. CMBS data in this report reflect a total outstanding balance of $606.2B: 58.9% ($356.8B) conduit CMBS, 41.1% ($249.5B) single-asset/single-borrower (SASB) CMBS.

 

Click here to download the full report. Contact Raj Aidasani for more information on CMBS loan performance.

Contact 

Raj Aidasani
Managing Director, Research
646.884.7566

The information provided herein is general in nature and for educational purposes only. CRE Finance Council makes no representations as to the accuracy, completeness, timeliness, validity, usefulness, or suitability of the information provided. The information should not be relied upon or interpreted as legal, financial, tax, accounting, investment, commercial or other advice, and CRE Finance Council disclaims all liability for any such reliance. © 2023 CRE Finance Council. All rights reserved.
CREFC's February 2024 Monthly CMBS Loan Performance Report
March 28, 2024
CRE Finance Council has released a report on CMBS loan performance for February.

News

Update: Senate Races Come into Focus

March 26, 2024

Several recent developments have helped bring the Senate map into focus.

Why it matters: Republicans have a geographic advantage in the roughly 1/3 of Senate seats up for re-elections. Right now the chamber is 51 (D) and 49 (R), though the Dem number includes three Independents.

  • With Sen. Joe Manchin’s (D-WV) retirement, GOP Gov. Jim Justice is all but certain to flip the seat. An evenly divided Senate would mean the vice president breaks any ties, and determines the majority.
  • Then, Republicans only need to flip one more seat to gain a majority. And they have at least three toss-ups: Ohio, Montana, and Arizona.

Ohio Senate Race: Republican Primary

The seat is rated as a “toss up” by the Cook Political Report and is one of three toss up races that will determine the makeup of the Senate come 2025. It is one of the two contests where a Democratic incumbent is defending their seat in a state former President Donald Trump won twice.

Bernie Moreno won the Ohio republican primary last Tuesday, defeating State Senator Matt Dolan and Ohio Secretary of State Frank LaRose. Moreno will now face Senator Sherrod Brown in the general election.

Moreno won 50.5% of the vote compared to Matt Dolan’s 32.9% and Frank LaRose’s 16.6 %.

  • Moreno has the backing of former President Trump, Senator J.D. Vance (R-OH) and Rep. Jim Jordan (R-OH).
  • Dolan had the endorsement of former Senator Rob Portman (R-Ohio) and Ohio Governor Mike DeWine (R-OH).

Why it matters: The Senate Democrat campaign arm spent millions boosting Moreno in the primary, as he is viewed as a more manageable opponent for Senator Brown this fall. Moreno was viewed as the candidate most aligned with former President Trump, a factor Democrats believe could limit his appeal to independents.

Democrats have used the strategy of boosting “easier-to-defeat” candidates in general elections with increasing frequency over the last few election cycles. This approach has worked for Democrats and you can read more about it here.

  • Democrats immediately began running ads attacking Moreno as someone who cannot be trusted, employing quotes from his two primary candidates during their sole debate.
  • For his part, current Senator Sherrod Brown stated that Moreno was “not fighting for Ohio” and suggested that Moreno’s position on abortion is not in line with Ohio voter priorities.

Democrats will likely focus on abortion access as a key issue in most races, and the issue will be directly on the ballot as a referendum issue in some states.

Montana Senate Race

The Montana primary isn’t until June 4, but the general election is all but set.

  • Tim Sheehy will likely face incumbent Senator Jon Tester (D-MT) for the seat in November. The race is shaping up to be one of the most expensive of the cycle.

Tester is running for his fourth term to represent Montana, having won in strong Democratic years of 2006, 2012, and 2018.

  • Tester has consistently outrun both President Obama and President Biden in the state, as the state has backed Republicans in every presidential election cycle since 1996.
  • But Tester’s elections have been won within four points, and he will share the ballot with Trump for the first time.

Republican Tim Sheehy is a former Navy SEAL originally from Minnesota and the CEO of Bridger Aerospace, a Belgrade-based aerial firefighting company. He has the backing of statewide and national Republicans, including Trump.

Learn more about the candidates here: Candidate profiles

What they’re saying: The trend of Chinese companies buying farmland in the state has become a key issue. Both candidates are highlighting their efforts to stop China from purchasing the land and are voicing their concerns about the purchases.

Monument vallet

 

Arizona Senate Race

After Sen. Kyrsten Sinema (I-AZ) announced she is forgoing a re-election run, this race looks to be a matchup between Rep. Ruben Gallego (D-AZ) and 2022 gubernatorial candidate Kari Lake (R). However, the primaries for this election don’t occur until July 30.

The candidates have already started to run general election ads, in advance of the official matchup.

Meet the candidates

Republican Kari Lake narrowly lost the race for Governor in 2022 to current Arizona governor Katie Hobbs but never officially conceded the race. Lake claimed as recently as February that she believed it was stolen.

  • Lake was the anchor for the Phoenix television station KSAZ-TV from 1999 to 2021, and was a vocal supporter of Obama in 2008.

Democrat Ruben Gallego has been a member of Congress since 2015, representing a solidly Democratic district outside Phoenix. Gallego had been openly critical of former Democrat Sinema (I-AZ), which prompted him to mount a primary challenge.

Learn more about each of these candidates here: Candidate profiles.

New Jersey?

While New Jersey is unlikely to be a battleground state, embattled Sen. Bob Menendez (D-NJ) announced he will not run for re-election as a Democrat. He may still file to run as an independent.

  • Menendez has been polling in the single digits against Democrat challengers, including New Jersey’s First Lady Tammy Murphy and Rep. Andy Kim (D-NJ).
  • Over the weekend, Murphy dropped out of the race after weak showings at several local party caucuses. The move likely cements Kim’s spot as the Democratic nominee.


Please contact James Montfort
(jmontfort@crefc.org) with any questions.

Contact 

James Montford
Manager, Government Relations
202.448.0857
jmontfort@crefc.org
Illustration of an Ohio interstate sign being watered by a hand in a suit
The information provided herein is general in nature and for educational purposes only. CRE Finance Council makes no representations as to the accuracy, completeness, timeliness, validity, usefulness, or suitability of the information provided. The information should not be relied upon or interpreted as legal, financial, tax, accounting, investment, commercial or other advice, and CRE Finance Council disclaims all liability for any such reliance. © 2023 CRE Finance Council. All rights reserved.
Update: Senate Races Come into Focus
March 26, 2024
Several recent developments have helped bring the Senate map into focus.

News

SEC Oversight Hearing 

March 26, 2024

The House Financial Services
Capital Markets Subcommittee convened a hearing on March 20 to discuss legislative proposals aimed at reforming the Securities and Exchange (SEC).

In her opening statement, Chair Ann Wagner (R-MO) highlighted her concerns with the SEC’s current rulemaking process, particularly the “alarming absence of stakeholder input and meaningful cost-benefit analysis.”

Subcommittee members scrutinized the speed at which the SEC has proposed and finalized new rules, the length of comment periods, the agency’s attention to stakeholder concerns, and the scope of its statutory authority.

In addition to debating the SEC’s rulemaking process, the subcommittee touched on the following key issues:

  • Climate disclosure;
  • Consolidated Audit Trail (would allow regulators to track activity in the U.S. markets for listed equities and options); and
  • Digital Assets and AI

The climate disclosure discussion, an exchange likely most pertinent to CREFC members, centered on the materiality aspect of the rule and whether its formulation aligns with the SEC’s statutory authority.

Why it matters. As reported in several CREFC Policy and Capital Markets Briefings, the SEC has proposed and finalized many rules that impact the CRE finance industry, including the:

  • Climate disclosure rule (see here for CREFC response);
  • Conflicts of interest in securitization rule (see here and here for CREFC’s comment letters); and
  • 15c2-11 no-action letter.

CREFC has had a productive engagement with SEC staff and leadership on the above issues and appreciates the revisions incorporated from proposed-to-final rulemaking that reflect our industry’s realities.

Please contact Sairah Burki (sburki@crefc.org) or David McCarthy (dmmcarthy@crefc.org) with any questions. 

Contact 

Sairah Burki
Managing Director, Regulatory Affairs
703.201.4294
sburki@crefc.org

David McCarthy
Managing Director, Head of Policy
202.448.0855
dmccarthy@crefc.org

The information provided herein is general in nature and for educational purposes only. CRE Finance Council makes no representations as to the accuracy, completeness, timeliness, validity, usefulness, or suitability of the information provided. The information should not be relied upon or interpreted as legal, financial, tax, accounting, investment, commercial or other advice, and CRE Finance Council disclaims all liability for any such reliance. © 2023 CRE Finance Council. All rights reserved.
SEC Oversight Hearing
March 26, 2024
The House Financial Services Capital Markets Subcommittee convened a hearing on March 20 to discuss legislative proposals aimed at reforming the Securities and Exchange (SEC).

News

Capital Markets Update Week of 3/26

March 26, 2024

Private-Label CMBS and CRE CLOs

  • Activity was slower last week, with only one transaction pricing:

- SCG 2024-MSP, a $220.2 million SASB backed by a floating-rate, five-year loan (at full extension) for Starwood Capital to refinance four full-service Marriott hotels totaling 1,016 rooms in three states.

  • Despite the lower volume last week, Commercial Mortgage Alert reports that at least a half-dozen SASB offerings are expected to hit the market in the coming weeks.
  • Year-to-date private-label CMBS and CRE CLO issuance totaled $18.9 billion, more than three times the $6.1 billion for the same period last year.

Spreads Steady

  • Conduit AAA and A-S spreads were unchanged at +88 and +130, respectively. Year to date, AAA and A-S spreads have tightened 28 bps and 35 bps, respectively.
  • Conduit AA and A spreads were unchanged at +150 and +250, respectively. Year to date, they have tightened by 75 bps and 125 bps, respectively.
  • Conduit BBB- remained at +675. YTD, BBB- spreads have tightened by 225 bps.
  • SASB AAA spreads were also unchanged, ranging from +140 to +162, depending on property type. They narrowed from +160 to +188 at the start of the year.
  • CRE CLO AAA spreads held at +160 / 165 (Static / Managed), and BBB- spreads at +650 (Static / Managed). For the year, spreads are tighter by 40 / 35 bps and 50 bps, respectively.

Agency CMBS

  • Agency issuance totaled $1.9 billion last week, consisting of $1 billion in Freddie-K and Multi-PC transactions, $590.7 million in Fannie DUS, and $354.9 million in Ginnie transactions.
  • Agency issuance for the year is $23.4 billion, 2% lower than the $23.9 billion for the same period last year.

The Economy, the Fed, and Rates…

Economic Data: Labor Market Resilience

  • Applications for unemployment benefits slightly decreased, signaling a resilient labor market. According to Labor Department data released on Thursday, initial claims decreased by 2,000 to 210,000 in the week ended March 16. The median forecast in a Bloomberg survey of economists called for 213,000.
  • The labor market has not shown signs of cooling despite elevated interest rates. Initial and continuing claims remain near historically low levels.

Fed Policy

  • Raphael Bostic, President of the Federal Reserve Bank of Atlanta, now expects only one interest-rate cut this year, revising his previous projection of two cuts. He emphasizes the decision hinges on incoming data and mentions concerns over inflation's trajectory.
  • The FOMC unanimously voted to maintain interest rates, signaling confidence in achieving its 2% inflation target with a potential rate reduction later in the year. The median projection suggests a federal funds rate reaching 4.6% by year-end, with a split among officials on the pace of future rate cuts.
  • The central bank revised its economic growth forecast upwards to 2.1% for the year but also expects slightly higher inflation than previously anticipated. Fed Chair Powell indicated that persistent inflation may complicate the path to a soft landing.
  • In an article for Financial Times, Torsten Slok, Chief Economist at Apollo Global and one of Wall Street’s most closely followed prognosticators, argues against expecting rate cuts this year. He cites the effects of previous Fed rate hikes and their distributional impact on consumers and firms. He suggests that easy financial conditions, spurred by anticipation of rate cuts and AI excitement, may keep rates higher for longer.

Treasury Yields

  • Long-dated Treasury yields fell to weekly lows, reflecting expectations of rate cuts amid slowing inflation. The 10-year yield was down 11 bps on the week to 4.20%.
  • Shorter-maturity yields declined, influenced by upcoming auctions and supportive international bond markets. The 2-year yield was down 14 bps to 4.59% for the week.
  • Mohamed El-Erian, President of Queens’ College, Cambridge, and a Bloomberg Opinion columnist, told Bloomberg Television on Friday that he considers a 10-year Treasury yield of around 4.25% reasonable for 2024. He anticipates a shift towards a steeper yield curve as markets adjust to higher inflation tolerances.

You can download CREFC’s one-page MarketWatch with statistics covering the economy and the CRE debt capital markets here.

You can also download CREFC’s 4Q 2023 Compendium of Commercial and Multifamily Real Estate Finance Statistics here.

Contact Raj Aidasani (raidasani@crefc.org) with any questions.

Contact 

Raj Aidasani
Managing Director, Research
646.884.7566
N/A
The information provided herein is general in nature and for educational purposes only. CRE Finance Council makes no representations as to the accuracy, completeness, timeliness, validity, usefulness, or suitability of the information provided. The information should not be relied upon or interpreted as legal, financial, tax, accounting, investment, commercial or other advice, and CRE Finance Council disclaims all liability for any such reliance. © 2023 CRE Finance Council. All rights reserved.
Capital Markets Update Week of 3/26
March 26, 2024
Private-Label CMBS and CRE CLOs

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