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ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES ARE IN THE DISCLOSURE APPENDIX. FOR
OTHER IMPORTANT DISCLOSURES, PLEASE REFER TO https://firesearchdisclosure.credit-suisse.com
CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION®
Client-Driven Solutions, Insights, and Access
CMBS Market Watch Weekly Securitized Products Americas
Market activity and relative value After snapping tighter over the prior two weeks, legacy CMBS spreads saw
limited movement over the past week. While retail demand still seemed
reasonably strong, there was an uptick in bid lists, especially within the AJ sector.
At the same time, it would appear that dealers’ balance sheets have gotten a
little heavier within private label CMBS.
We still believe that the sector offers good relative value and could tighten
further before the end of the year. However, after the rapid spread tightening
following the end of the debt ceiling debate, we think a period of consolidation
is healthy for the market.
Sears evaluates more store closures On Tuesday, Sears Holdings Corporation announced that it will evaluate
closing additional stores, potentially as leases roll.
While we work on digging into the CMBS exposure in detail, we thought it
would be useful to do an initial search for loans where Sears or Kmart was
identified as a top-three tenant and where the lease appears set to expire.
We also review the status of loans that had exposure to the sale of Sears
pads as well as the loans that were exposed to the store closures announced
in early 2012.
Loans in the news The potential sale of a stake in One World Wide Plaza has been delayed by
a lawsuit.
We also discuss Kimco buying a portfolio that accounts for a large percentage
of a 2012 transaction as well as the sale of a multifamily property that backs a
Freddie K deal.
Refinance risk in 2014 maturities and beyond One of the big drivers of increased delinquencies in the first half of 2012 was
the large number of loans that were reaching maturity. However, over the past
year, maturing loans have been less problematic.
In this section, we reapply a tool we introduced in the past that looks at
past successful refinances, based on DSCR and debt yield, to help predict
future loan payoffs.
The simplified analysis leads us to conclude that 2014 maturities should not
be problematic and that 2016/2017 maturities may see rates of refinancing
above consensus even if interest rates shift higher.
Research Analysts
Roger Lehman
+1 212 325 2123
Serif Ustun, CFA
+1 212 538 4582
Sylvain Jousseaume, CFA
+1 212 325 1356
CMBS and CMBX spreads and prices
CMBS swap spread/price
1-wk chg
Trailing 12-month
10/29/13 Min Max Avg
AAA 10yr 114 -1 70 128 97
GG10 A4 165 -2 116 173 147
AM 205 0 110 260 197
AJ 560 -15 420 775 598
AA 10yr ($) 56 0 50 62 55
A 10yr ($) 30 0 28 30 30
BBB- 10yr ($) 11 0 11 11 11
New issue CMBS
AAA 5yr (30% CE) 72 -1 42 80 57
AAA 10yr (30% CE) 93 -2 70 121 90
AAA Junior 120 -6 95 170 124
AA 170 -5 130 225 166
A 230 -10 167 260 220
BBB- 380 -15 292 490 383
CMBX.3
AAA 97.3 0.2 93.0 98.2 96.3
AM 92.9 0.4 83.8 94.4 90.0
AJ 75.4 0.8 62.4 79.7 71.0
BBB 7.5 -0.1 7.5 9.1 8.3
BBB- 6.5 -0.1 6.5 7.6 7.1
Agency CMBS
GNR 10yr 140 0 70 140 95
FNA 10yr 67 -4 43 77 56
FREMF 10yr 62 -3 41 75 54
SBA 504 10yr 51 -2 13 53 28
Source: Credit Suisse, Markit
30 October 2013
Fixed Income Research
http://www.credit-suisse.com/researchandanalytics
FOR INSTITUTIONAL CLIENT USE ONLY
30 October 2013
CMBS Market Watch Weekly 2
Market activity and relative value After snapping tighter over the prior two weeks, legacy CMBS spreads saw limited
movement over the past week. While retail demand still seemed reasonably strong, there
was an uptick in bid lists, especially within the AJ sector. At the same time, it would appear
from TRACE data and the New York Fed’s report that dealers’ balance sheets have gotten
a little heavier within private label CMBS.
Some of this may be attributable to the continued supply of A1A bid lists. The visible
supply last week totaled an additional $1.4 billion, but given the reported transactions on
TRACE (Exhibit 1) it appears that additional bonds could have traded on the follow.
Exhibit 1: TRACE trading volume
0
1,000
2,000
3,000
4,000
5,000
6,000
10/3
0/1
3
10/1
6/1
3
10/1
/13
9/1
7/1
3
9/3
/13
8/1
9/1
3
8/5
/13
7/2
2/1
3
7/8
/13
6/2
1/1
3
6/7
/13
CMBS Daily Volume
5-Day Average Trading Volume
$million
Source: Credit Suisse, FINRA
Despite the supply, spreads in the A1A sector, and in fact generally across the legacy
curve, were close to unchanged. Over the same period, corporate spreads were a touch
wider (judging by both the IG and HY CDX indices), so CMBS did not lose any ground on
a relative basis.
We still believe that the sector offers good relative value and could tighten further before
the end of the year. However, after the rapid spread tightening following the end of the
debt ceiling debate, we believe a period of consolidation is healthy for the market.
We also believe that further spread tightening is predicated on the lack of any large
surprises. Volatility, as we discussed last week, has come down meaningfully, and we
view this trend as a large positive for spreads. While the consensus remains for the Fed to
hold off on tapering into next year, today’s Fed announcement that it was not altering its
bond buying program was a positive for the market.
Within the legacy sector, we still believe the wider-trading AMs have tremendous value,
even after their recent move tighter. We also continue to believe that some of the A1As
are very cheap from a relative standpoint compared to other short-duration assets.
However, as we have warned throughout the last year, these premium bonds need to be
looked at carefully given the risk of cash flow acceleration, but we argue there are still
opportunities, especially in some of the wider trading names.
We have also noted, over the past few weeks, that select, mid-tier AJs should tighten.
While we still believe this view will be true over the intermediate term, there may be a
temporary pause in that trend as new supply comes to market and the Street digests what
has been sold.
30 October 2013
CMBS Market Watch Weekly 3
While legacy spreads have been relatively static, new issue spreads tightened further
over the past week. The super-senior, last cash flow bonds are approximately 5 bp
tighter, while triple-B minus bonds are in around 15 bp. The credit curve has also
continued to flatten.
Year-to-date, we have seen nearly $44 billion in conduit issuance and two deals, WFRBS
2013-C17 and GSMS 2013-GC16, are now in the market. We have generally liked the
new issue market and especially the super-seniors (which we view as cheap to
corporates) and single- and double-A mezzanine tranches. We recognized that we were
giving up some potential upside by avoiding triple-B minus bonds (in an environment
where flattening seemed likely) but still preferred the risk/reward trade-off of being slightly
higher up the stack.
Despite the strong reception of the past few new issue deals, we have some concerns
about the impending supply as we head into the final stretch of the year (with many
holiday-shortened weeks). There appear to be as many as nine conduit deals on the
docket ($11 billion in total) that could come before the end of the year. In addition, there
are several single-borrower transactions in the queue. While some deals may slip into next
year, such supply could potentially start to weigh on the market.
Given this outlook, we still believe our preference for super-seniors and single-As within
new issue makes sense.
On the Agency CMBS side, we have seen spreads firm up, but they have lagged the
tightening noted on the private label side over the past few weeks. The dip in yields and
the firming up of spreads have also served to increase borrower demand for financing for
multifamily borrowing.
Sears evaluates more store closures On Tuesday, October 29, Sears Holdings Corporation pre-announced results for the third
quarter (ending November 2) as well as a number of corporate actions aimed at improving
its financial flexibility.
Most relevant for the CMBS market, Sears revealed it will “review each location, including
leased locations that are set to expire, and decide whether or not to renew such leases.”
As we discuss further below, the company has already shrunk its store base, and given its
latest earnings, further shrinkage should not come as a surprise. The third quarter
guidance was negative $250 million to $300 million of adjusted EBITDA.
We do not believe there will be any great near-term impairment across the CMBS sector
from Sears’ ongoing store closures, although some individual loans may be adversely
affected. However, we take this as another sign that retail operations in the United States
are facing ongoing challenges and will continue to evolve over the coming years.
Sears Holdings is the parent company for both Sears and Kmart stores, which merged in
2005. It operated 2,036 full-line and specialty retail locations in the United States as of the
end of its 2Q reporting period. In addition, it operates locations in Canada through a 51%
owned subsidiary (part of the company’s announcement this week indicated the sale of
five store leases in Canada).
We show the breakdown of stores, over time, in Exhibit 2. The full-line Sears stores
average 136k square feet. Most of the Kmart stores are classified by the company as
“discount stores, averaging 98k square feet." It also had, as of August, 25 Kmart Super
Centers, which are slightly larger (averaging 168k square feet). The company has already
eliminated nearly 10% of its stores over the past three years, with almost 2% of those
eliminations coming in the first half of this year.
30 October 2013
CMBS Market Watch Weekly 4
Exhibit 2: Total US-based Kmart and Sears stores (adjusted *)
Period Kmart Sears Full-line Sears Specialty * Total
Q2 2013 1,195 791 50 2,036
Q1 2013 1,211 798 53 2,062
YE 2012 1,221 798 54 2,073
YE 2011 1,305 867 65 2,237
YE 2010 1,307 894 60 2,261
* We have excluded Sears Hometown and Outlet stores from the 2010 and 2011 totals. The company completed separation from those businesses back in October 2012. The remaining specialty stores are a mixture of freestanding Sears Auto Centers and Land’s End Stores – the two business Sears announced it was evaluating and potentially might separate from Sears Holdings. Source: Credit Suisse, company filings
Many of the store closures occurred during 2012. At the end of 2011 the company
announced it was planning to close between 100 and 200 Kmart and Sears locations. We
discussed the CMBS exposure to the partial list of locations of stores slated to be closed that
the company provided in January 2012 and February 2012. We ultimately found 33 loans
exposed to the list of confirmed closures. We thought it interesting to see how those loans
have fared and summarize what happened to them in Exhibit 3, at the end of this section.
In preparation for further closures of Kmart and Sears stores, we plan to do a deep dive
into the CMBS-related exposure (as we did with our series of write-ups on JC Penney).
However, doing this thoroughly and accurately is a very manually intensive exercise. One
cannot just rely on the listed top three tenants in the CMBS deals, as often there is
exposure to a shadow anchor that is not part of the collateral. In addition, stores open and
close over time and the tenant data is often not well reported or maintained.
While we work on digging into the exposure in detail, we thought it would be useful to do
an initial search for loans where Sears or Kmart was identified as a top three tenant, at
least as of securitization, and where the lease appears set to expire over the next year (we
picked the end of 2014 as a cutoff). Given the company’s statement, properties with near-
term lease renewals seem to be the most at risk of closure if there is an underperforming
Sears or Kmart location. We show this exposure in Exhibit 4 at the end of this section.
It is possible we will see closures of other locations, but we believe given the company’s
statement that this is less likely. The company could offer to sell some of its owned
locations or (less likely) just vacate them. In fact, in February 2012, the company
announced the sale of 11 owned pads to General Growth Properties. Four of the eleven
stores were located in malls that were collateral for loans in CMBS, with the Sears location
part of the collateral in only two of them. We show these loans (and what happened to
them) in Exhibit 3. Three of the loans paid off with no loss. One property, West Oaks Mall,
in Ocoee, Florida, suffered a hefty 66% loss severity.
The company also has the option of closing a store prior to its lease termination. A dark
anchor, even if it were paying rent, would be detrimental to a loan’s credit quality. Some
examples of this, such as Victorian Square in JPMCC 2006-LDP7, can be seen in Exhibit 3.
More likely, however, we believe the company would negotiate a lease termination with the
landlord, which could prove to be a positive for the mall’s performance.
In Exhibit 3 we also list the loans that had exposure to the sale of Sears pads as well as
the loans that were exposed to the store closures announced in early 2012. Many loans
wound up paying off in full or continued to perform, but more often the loan either took a
loss or is delinquent today.
However, it is worth noting that many of these were already problematic loans, where the
property was experiencing problems prior to the announced closure. This was a point we
made with JC Penney exposure in CMBS. Underperforming stores are likely to be found in
underperforming locations. As a result while a store closure can be detrimental, it less
often will turn a strong mall into a weak mall and more often just further impair the
performance of an already underperforming location. On the flip side, the departure of an
underperforming store at a strong mall can prove to be a positive.
30 October 2013
CMBS Market Watch Weekly 5
Exhibit 3: Status loans affected by 2012 closures and sale of pads
CMBS exposure related to sale of pads to GGP
Deal Loan City, State Original
Bal ($mn) Loan
Status Notes
BSCMS 2007-PW18 GGP Portfolio – Marketplace Shopping Center
Champaign, IL 156.0 Paid Off Portfolio loan paid off with no loss
CD 2006-CD3 Ala Moana Center Honolulu, HI 300.0 Paid Off Refinanced in a standalone deal in 2012 (GSMS 2012-ALOH) CD 2007-CD4 404.0 Paid Off
CGCMT 2006-C5 211.0 Paid Off
CGCMT 2007-C6 100.0 Paid Off
CWCI 2006-C1 225.0 Paid Off
CWCI 2007-C2 100.0 Paid Off
CSFB 2005-C6 Fashion Place Murray, UT 151.7 Paid Off 1% loss – refinanced in a standalone deal (BBUBS 2012-TFT)
WBCMT 2003-C9 West Oaks Mall Ocoee, FL 75.9 Liquidated 66% loss severity – went delinquent after closure announced
CMBS exposure to 2012 store closings BACM 2005-6 Island Walk Shopping Center Fernandina Beach,
FL 11.5 Perform/
Watchlist Performance suffered since closure announced
BACM 2006-4 Gratiot Crossing Chesterfield, MI 13.5 REO Loan was not in special when closure announced. Became REO in Oct 2012. Occupancy dropped to 37%
CD 2005-CD1 Great Indoors – Sears – Alpha Rd Farmers Branch, TX 16.1 Current Sears converted from Great Indoors to an Outlet Store
CD 2007-CD4 Broomfield Plaza Shopping Center Broomfield, CO 9.5 Perform/ Watchlist
Added to the watchlist after closure announced
CSFB 2002-CKN2 Crystal River Mall Crystal River, FL 16.1 Liquidated 72% Severity – was 90+ delinquent well before closure announced
CWCI 2006-C1 Kandi Mall Willmar, MN 14.8 Perform Past its September 2011 ARD date
CWCI 2007-C2 Medwick Marketplace Medina, OH 18.2 Perform/ Watchlist
Borrower states any tenants with early termination rights or co-tenancy clauses tied to Kmart are either exercising them or using them to exact lease concessions.
GMACC 2004-C2 Military Circle Mall Norfolk, VA 61.2 Special Sears vacated – borrower was trying to buy out lease
GMACC 2004-C2 Shoppes at St. Lucie West Port St. Lucie, FL 16.8 Paid off Sears vacated & paid rent. Paid off with Yield Maintenance
JPMCC 2006-CB15 Lightstone Portfolio – Bradley Square Cleveland, TN 73.9 Liquidated 77% loss severity. Multi property loan was REO before store closure announced
MEZZ 2006-C4 Lightstone Portfolio – Bradley Square Cleveland, TN 4.0 Liquidated 100% loss severity. Multi property loan was REO before closure announced MEZZ 2007-C5 3.0
JPMCC 2006-LDP7 Victorian Square Midlothian, VA 12.2 Perform/ Watchlist
Big drop in occupancy since 2012 notes indicate "This property has been devastated by K-Mart not renewing the lease"
JPMCC 2007-CB18 Golden East Crossing Rocky Mount, NC 49.0 90+day, Modified
Had been in special before closure announced
MEZZ 2007-C5 Golden East Crossing Rocky Mount, NC 3.1 90+day, Special
Had been in special before closure announced
LBUBS 2003-C3 Polaris Fashion Place Columbus, OH 125.0 Paid Off No Loss
LBUBS 2007-C6 PECO Portfolio – Westdale Plaza Baraboo, WI
323.9 90+day, Special
Westdale Plaza is part of the 37 property portfolio loan.
MLCFC 2007-9 8585 South Yosemite Street Lone Tree, CO 25.5 Perform Sears converted from Great Indoors to an Outlet Store. 100% Occupied as of YE 2012
MSC 2005-IQ10 69th Street Philadelphia Upper Darby, PA 65.0 Liquidated 49% loss severity. First went delinquent right before closure announced
MSC 2005-T17 Coventry Mall Pottstown, PA 76.5 FCL Special servicing prior to announced store closure. Modified in late 2011 with A/B note split with a two-year maturity extension. Became REO last month.
MSC 2007-IQ14 Ershig Mall Portfolio – Middlesboro Mall
Middlesboro, KY 40.2 Perform/ Watchlist
On watchlist before announced closure. Middlesboro Mall store is closed but Sears in Mercer Mall is still open. All three properties in the portfolio are 85% to 90% occupied.
MSC 2007-IQ16 Ashtabula Mall Ashtabula, OH 40.3 REO The loan was 90+-days delinq before Sears closure was announced. The property is 58% occupied as of 2013 H1. Kmart store in Ashtabula Mall is still open.
WBCMT 2007-C30 Eastland Center Harper Woods, MI 39.5 Current The property was 89% occupied as of 1H 2013.
CSFB 2001-CKN5 Manhattan Plaza Toledo, OH 4.8 Liquidated 68% Loss severity. Loan transferred to Special for maturity default before announced store closure
Source: Credit Suisse, Trepp, company filings
30 October 2013
CMBS Market Watch Weekly 6
Exhibit 4: Sears & Kmart CMBS exposure with reported lease expirations through 2014
Sorted by deal. Sears/Kmart look-thru exposure is calculated based on the tenant’s square footage in the collatearl times loan balance
BloombergTicker Asset Name City State
Sears Lease Exp Date
Kmart Lease Exp Date
Loan Status
Loan Bal
($mn)*
Sears/ Kmart
loan exp
Sears/ Kmart look-
thru exp
JCP look- thru exp
BACM 2005-3 Kmart Store #3631 – Freeport (Emster Portfolio) Freeport IL 2013 03 FCL 3.4 0.2% 0.2%
BACM 2006-3 Rushmore Mall Rapid City SD 2014 09 Current 94.0 6.0% 1.0% 0.7%
BACM 2006-5 Bristol Mall Bristol VA 2014 07 Current 17.4 0.9% 0.2% 0.2%
BSCMS 2000-WF1 Sears Auto - Ground Lease Old Bridge NJ 2014 04 Current 0.5 4.6% 4.6%
BSCMS 2005-PWR9 Country Fair Shopping Center Hales Corner WI 2014 07 Current 3.9 0.3% 0.2%
BSCMS 2006-PW14 Pinellas Park Square Clearwater FL 2014 12 90+ Day 7.3 0.4% 0.1%
BSCMS 2007-T28 Gravois Dillon Plaza High Ridge MO 2014 12 Current 12.6 0.8% 0.1%
CD 2006-CD3 Northport Corners Shopping Center Northport AL 2014 11 Current 6.8 0.3% 0.2%
CFCRE 2011-C1 Hudson Valley Mall Kingston NY 2014 09 Current 51.0 8.2% 1.2% 0.7%
CGCMT 2005-C3 Cleveland Mall Shelby NC 2014 06 Current 9.8 1.1% 0.0%
CGCMT 2006-C4 DuBois Mall DuBois PA 2014 03 Current 31.6 1.9% 0.3% 0.2%
CGCMT 2007-C6 Skyview Plaza (DDR Southeast Pool) Orlando FL 2014 07 Current 14.7 0.4% 0.1%
COMM 2006-C7 Kellogg Shopping Center (Kellogg Gateway Portfolio) Wichita KS 2013 02 < 30 Day 3.3 0.2% 0.1%
COMM 2006-C8 Sierra Vista Mall Clovis CA 2014 10 60 Day 77.8 3.0% 0.5%
COMM 2007-C9 Skyview Plaza (DDR Southeast Pool) Orlando FL 2014 07 Current 7.7 0.3% 0.1%
CSFB 2001-CKN5 Bayshore Mall Eureka CA 2014 11 Current 27.9 98.2% 20.1%
CSFB 2005-C1 The Mall at Yuba City Yuba City CA 2014 02 Current 32.9 3.7% 0.9% 0.6%
CSFB 2005-C3 Center of Winter Park Winter Park FL 2014 03 Current 20.7 1.9% 0.7%
CSFB 2005-C4 Cedar-Geneseo Plaza Geneseo NY 2013 08 Current 1.1 0.1% 0.1%
CSFB 2005-C6 Parkway Plaza Durham NC 2013 11 Current 9.5 0.6% 0.3%
CSMC 2006-C1 Arrowhead Mall Muskogee OK 2014 12 Current 17.4 0.8% 0.1% 0.1%
CSMC 2007-C5 Westgate Center Mobile AL 2013 10 Current 6.0 0.3% 0.1%
DLJCM 1998-CG1 Cherokee Shopping Center Lodi CA 2014 12 Current 3.2 4.6% 3.1%
GECMC 2005-C2 Sattler Square (Michigan Retail Portfolio) Big Rapids MI 2013 03 Current 3.4 0.4% 0.0%
GMACC 1997-C1 Mauston Shopping Plaza Mauston WI 2013 10 Current 3.2 4.5% 2.4%
Medford Center Medford WI 2014 04 Current 3.1 4.3% 2.6%
Portage Center (2 Property Retail Portfolio) Portage WI 2014 04 Current 2.2 3.0% 2.7%
Valley Shopping Center Athens Township PA 2014 07 < 30 Day 1.3 1.8% 1.0%
GMACC 2005-C1 Bristol Farms Plaza Bristol CT 2013 10 < 30 Day 9.6 1.3% 0.3%
GMACC 2006-C1 Newburgh Mall Newburgh NY 2014 11 90+ Day 30.2 2.4% 0.5%
GSMS 2006-GG8 Hutchinson Mall (Rubloff Retail Portfolio) Hutchinson KS 2014 10 90+ Day 23.0 0.8% 0.1% 0.1%
GSMS 2011-GC3 Oxford Valley Mall Middletown PA 2014 08 Current 67.9 5.0% 0.7% 1.1%
Piney Green Shopping Center Midway Park NC 2014 11 Current 4.8 0.4% 0.2%
GSMS 2013-GC12 Marketplace at Huntingdon Valley Huntingdon Valley PA 2014 11 Current 40.8 3.4% 0.3%
GSMS 2013-GC13 Crossroads Center Saint Cloud MN 2014 06 Current 106.3 8.0% 1.3% 1.7%
GSMS 2013-GC14 Indiana Mall Indiana PA 2014 09 2014 11 Current 16.9 1.4% 0.5% 0.2%
JPMC 2000-C9 KMart – Baltimore Baltimore MD 2014 11 < 30 Day 2.8 22.8% 18.0%
JPMCC 2004-LN2 Chesapeake Square Chesapeake VA 2014 10 Current 65.6 8.5% 1.4% 0.0%
JPMCC 2005-CB11 Shopper's World Shopping Center Clifton Park NY 2014 05 Current 16.1 1.4% 0.8%
JPMCC 2005-CB13 Middletown Shopping Center Middletown DE 2013 11 Current 4.1 0.2% 0.0%
JPMCC 2005-LDP4 Inverness Regional Shopping Center Inverness FL 2014 05 Current 8.9 0.6% 0.3%
JPMCC 2006-CB16 Village at Mableton (Centro Portfolio) Mableton GA 2014 11 Current 12.3 0.8% 0.3%
JPMCC 2006-CB17 Wendland Plaza Killeen TX 2013 11 Current 8.0 0.3% 0.2%
JPMCC 2006-LDP6 Seaford Village Seaford DE 2014 11 Current 10.0 0.7% 0.2%
JPMCC 2006-LDP7 Salisbury Northgate Salisbury MD 2014 03 Current 4.4 0.1% 0.0%
JPMCC 2006-LDP9 Kimco PNP – Sunset Square Bellingham WA 2014 07 Current 39.0 1.0% 0.3%
JPMCC 2007-C1 Gurnee Mills Gurnee IL 2014 04 Current 75.0 7.1% 0.9%
JPMCC 2007-CB18 Park Shore Shopping Center (Centro Heritage IV) Naples FL 2013 11 Current 14.6 0.4% 0.2%
JPMCC 2007-CB19 Trinidad Plaza Trinidad CO 2014 11 Current 3.2 0.1% 0.0%
JPMCC 2007-CB20 Gurnee Mills Gurnee IL 2014 04 Current 246 11.1% 1.4%
30 October 2013
CMBS Market Watch Weekly 7
Exhibit 4: Sears & Kmart CMBS exposure with reported lease expirations through 2014 (continued)
Sorted by deal. Sears/Kmart look-thru exposure is calculated based on the tenant’s square footage in the collatearl times loan balance
BloombergTicker Asset Name City State
Sears Lease Exp Date
Kmart Lease Exp Date
Loan Status
Loan Bal
($mn)*
Sears/ Kmart
loan exp
Sears/ Kmart look-
thru exp
JCP look- thru exp
JPMCC 2010-CNTR Laurel Square (Centro Portfolio) Bricktown NJ 2013 10 Current 12.4 2.7% 1.0%
Ridgeview Centre (Centro Portfolio) Wise VA 2014 06 Current 5.4 1.2% 0.5%
The Pines (Centro Portfolio) Pineville LA 2014 11 Current 4.7 1.0% 0.5%
JPMCC 2011-C3 Holyoke Mall Holyoke MA 2014 10 Current 212.5 14.6% 2.0% 1.6%
JPMCC 2012-CBX Southpark Mall Colonial Heights VA 2014 02 Current 65.7 5.2% 1.5% 0.0%
JPMCC 2012-WLDN Walden Galleria Cheektowaga NY 2014 04 Current 270.0 100.0% 9.6% 15.3%
KEYC 2007-SL1 Gateway Plaza Conneaut OH 2014 05 < 30 Day 2.4 2.8% 1.5%
LBCMT 1998-C4 Kmart – Rock Springs Plaza Rock Springs WY 2014 03 Current 1.1 1.7% 1.7%
LBUBS 2005-C3 Chambersburg Chambersburg PA 2014 10 Current 5.4 0.4% 0.2%
Lancaster Manheim PA 2014 01 Current 6.5 0.5% 0.4%
LBUBS 2005-C5 Magnolia Mall Florence SC 2014 10 Current 57.3 3.6% 0.6% 0.7%
LBUBS 2006-C1 River Valley Mall Lancaster OH 2014 10 Current 46.7 2.5% 0.2% 0.2%
LBUBS 2007-C1 Handsboro Square Gulfport MS 2013 11 Current 9.3 0.3% 0.2%
LBUBS 2007-C7 Abingdon Towne Center Abingdon VA 2013 11 Current 9.3 0.4% 0.2%
MCFI 1998-MC2 K-Mart Kahului Kahului, Maui HI 2014 02 Current 4.7 18.9% 18.9%
MEZZ 2006-C4 Dakota Square Mall Minot ND 2013 10 Current 3.5 6.3% 0.9% 1.1%
MLCFC 2006-1 Birney Mall (Lightstone Portfolio) Moosic PA 2014 10 Current 4.8 0.4% 0.2%
Shillington Plaza (Lightstone Portfolio) Reading PA 2014 07 Current 4.4 0.4% 0.2%
MLCFC 2006-3 Walnut Hill Plaza Woonsocket RI 2013 08 90+ Day 23.0 1.2% 0.2%
MLMT 2004-BPC1 Simon – Washington Square Mall (A/B combined) Indianapolis IN 2014 10 < 30 Day 27.2 4.1% 1.8%
MLMT 2004-KEY2 Skyview Plaza Shopping Center East Liverpool OH 2013 07 Current 5.1 0.9% 0.1%
MLMT 2005-LC1 Piazza di Bonita Bonita Springs FL 2014 12 Current 2.7 0.3% 0.1%
MLMT 2005-MCP1 Queen Ka'ahumanu Center Kahului HI 2013 10 Current 89.4 7.7% 1.1%
MLMT 2006-C2 G Street Industrial Fresno CA 2014 09 < 30 Day 2.6 0.3% 0.1%
Kmart – IL Granite City IL 2013 11 Current 1.8 0.2% 0.2%
Kmart – NC Smithfield NC 2013 08 Current 0.8 0.1% 0.1%
Kmart – NM Las Cruces NM 2013 09 Current 3.6 0.4% 0.4%
Windmill Lakes Batavia IL 2014 12 Current 8.2 0.9% 0.3%
The Shops of Fairlawn (A/B note combined) Fairlawn OH 2014 01 Current 15.5 1.6% 0.2%
MSC 2004-HQ4 215-225 Route 73 North (Petsmart) Berlin NJ 2013 10 Current 4.1 0.5% 0.3%
MSC 2005-HQ5 Richmond Square Mall Richmond IN 2013 08 Current 12.6 1.3% 0.4% 0.3%
MSC 2006-HQ9 Keebler Krossing Collinsville IL 2014 11 REO 6.5 0.3% 0.3%
MSC 2011-C2 Towne West Square Mall Wichita KS 2014 04 Current 49.5 4.2% 1.2% 0.0%
MSC 2011-C3 Westfield Belden Village Canton OH 2013 08 Current 100.0 7.1% 0.5%
MSC 2012-C4 Capital City Mall Camp Hill PA 2014 07 Current 64.4 6.0% 1.2% 1.3%
PNCMA 2000-C2 Southside Plaza Shopping Center Martinsville VA 2014 08 Current 3.2 4.0% 2.6%
PSSF 2000-C1 K-Mart Store Menomonie WI 2014 12 Current 1.8 20.1% 20.1%
UBSBB 2012-C3 Apache Mall Rochester MN 2014 02 Current 98.1 9.2% 1.8% 2.0%
UBSC 2011-C1 Poughkeepsie Galleria** Poughkeepsie NY 2013 08 Current 83.8 6.4% 0.0% 1.7%
UBSCM 2012-C1 Poughkeepsie Galleria** Poughkeepsie NY 2013 08 Current 83.8 6.4% 0.0% 1.7%
WBCMT 2005-C20 Lakewood Marketplace - SEC Lakewood CA 2013 08 Current 15.5 0.8% 0.1%
WBCMT 2006-C29 Dakota Square Mall(1) Minot ND 2013 10 Current 54.2 2.0% 0.3% 0.4%
Watson Glen (Centro Syndicate 2 Pool) Franklin TN 2013 10 Current 12.9 0.5% 0.2%
WBCMT 2007-C32 Skyview Plaza (DDR Southeast Pool) Orlando FL 2014 07 Current 6.7 0.2% 0.1%
WBCMT 2007-C33 Aroostook Center Mall Presque Isle ME 2013 10 2016 11 Current 10.9 0.4% 0.1%
WFCM 2010-C1 Tradewinds Shopping Center Key Largo FL 2014 10 Current 9.6 1.4% 0.7%
WFRBS 2011-C2 Port Charlotte Town Center Port Charlotte FL 2014 08 < 30 Day 38.4 3.1% 0.0% 0.0%
WFRBS 2012-C10 Towne Mall Elizabethtown KY 2014 10 Current 23.1 1.8% 0.3% 0.3%
* Allocated balance for portfolio loans ** Non collateral anchor Source: Credit Suisse, Trepp, deal documents
30 October 2013
CMBS Market Watch Weekly 8
Loans in the news Court delays partial sale of One World Wide Plaza
COMM 2013-WWP
The potential sale of a stake in One World Wide Plaza has been delayed by a lawsuit.
RXR Realty is suing both the current owners and the potential buyer over the sale of a
48.9% stake in the building.
The 1.8 million square foot, New York City, office building is the only asset backing COMM
2013-WWP. The securitized loan totals $710 million. In addition there is $163 million of
mezzanine financing in place.
The suit revolves around RXR’s claim that it had an agreement to buy the stake in the
building, based on a valuation of $1.25 billion. The agreement also gave them the right
to buy the remaining interest, based on a $1.35 billion valuation, according their court
filings. For comparison, the property was appraised at $1.35 billion, according to the
deal documents.
The suit alleges that the owners coerced a termination of the RXR agreement so that they
could sell the building to American Realty Capital Properties (ARC) on better terms (a
$1.35 billion valuation for the minority stake). The suit also claims that ARC
misappropriated confidential information that RXR shared with it when the two entities
were discussing partnering in the purchase.
RXR is seeking a reinstatement of the agreement as well as damages, attorney fees, and
other costs. The owner, George Comfort & Sons and its partners, have claimed that RXR
could not obtain the financing and willingly walked away from the purchase, according to
an article in Crain’s.
Earlier this week, the judge overseeing the case ordered a temporary halt to any transfer
so that the case could be heard. There is a scheduled hearing set to take place on
Wednesday, October 30, 2013.
Aventerra at Dobson Ranch sells for over $38 million
FREMF 2012-K17
Aventerra at Dobson Ranch, a 576-unit multifamily complex in Mesa, AZ, is selling for
$38.4 million, according to Business Real Estate Weekly of Arizona. Bridge Investment
Group Partners was the buyer.
The property currently secures a $20.4 million loan, securitized in FREMF 2012-K17,
which represents 1.6% of the deal. The property was appraised at $29.5 million in
September 2011. According to the article, the new owner will assume the existing loan,
which does not mature until November 2021. The loan is locked out for an additional five
months and then becomes defeasible. In addition, it has taken out a second supplemental
loan of $5.5 million. Even with the additional financing, the implied current loan-to-value
ratio, based on the purchase price, seems modest at 67%.
30 October 2013
CMBS Market Watch Weekly 9
Kimco buying properties backing GPB Portfolios
MSC 2012-C4
Kimco Realty Corp. has announced an agreement to buy 24 retail properties located in the
Northeast. In total, the purchase totals 1.4 million square feet and the company is paying
$270 million (about $193/per square foot).
The properties being sold by the Bollard Group include assets that back two CMBS loans.
The two loans are securitized in MSC 2012-C4 and known as GPB Portfolio 1
($60.8 million and 5.6% of the deal) and GPB Portfolio 2 ($60.7 million and 5.6% of the
deal). Each loan is backed by 11 properties, so combined they encompass 22 of the
24 retail assets being purchased.
Unfortunately not enough information is yet available to derive the exact value of each
portfolio. The two portfolios total approximately 1.2 million square feet, in aggregate,
or 87% of the total. They had a combined appraisal of $210.6 million at the time of
securitization. While the value of the portfolio may not be evenly distributed, on a per
square foot basis, the sale price would indicate there has likely been some price
appreciation in the collateral for these two loans compared to the appraised value
noted above.
2014 maturities and beyond One of the big drivers of increased delinquencies in the first half of 2012 was the large
number of loans, especially 5-year loans, that were reaching maturity. However, over the
past year, maturing loans have been less problematic. Not only did fewer loans mature in
2013, but those that did had a much higher pay-off rate. We attribute that to a combination
of the set of maturing loans being less levered as well as the ongoing improvement in the
financing environment for commercial real estate.
While lower rates have been a contributing factor, there has also been a marked
improvement in the availability of financing. We show, in Exhibit 5, results of the Mortgage
Bankers Association quarterly survey of originations. The four-quarter moving average has
been up in all but one of the past 16 periods and was 29% higher in the third quarter of
2013 than the year-ago period.
Exhibit 5: The Commercial/Multifamily Mortgage Bankers Originations Index 11
3 15
71
29
19
21
23 1
67
16
6
105
142 165
242 261
289
108
54 73
119
$508bn $181bn
$82bn $119bn $184bn
$244bn
0
50
100
150
200
250
300
350
400
450
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 13
MBA OriginationIndexYearly avg
Amounts shown in billions of dollars are actual origination numbers. The bars reflect the varying levels of the index. Source: Credit Suisse, Mortgage Bankers Association
30 October 2013
CMBS Market Watch Weekly 10
While the availability of financing continues to improve, there is concern that rising interest
rates could negatively impact the commercial real estate and CMBS markets. As we have
discussed in the past, higher interest rates could lead to higher cap rate rates and a
commensurate drop in commercial real estate prices. Our view is that there is a possibility
that cap rates will rise slightly over the coming quarters, but any move should be far less
than the one-for-one moves suggested by a change in Treasury rates and should not be
very detrimental to commercial real estate prices.
The other concern is that higher commercial mortgage lending rates will make it more
difficult for loans to refinance. This is true for both new issue and legacy loans. While we
believe the historically low rate environment may ultimately lead to extension risk on newly
issued mortgages, this will not present itself on the vast majority of more recently issued
deals for nine or ten years.
Legacy loans, on the other hand, scheduled to mature over the next few years, will be
relatively more sensitive to changes in borrowing rates and less influenced by changes in
other factors, such as property level cash flows, inflation, and real estate price
appreciation, which could potentially counterbalance a rise in rates.
With this in mind, we revisit the upcoming legacy maturities in 2014 and beyond. The
ability for maturing loans to pay off on time affects many aspects of CMBS relative value.
Last year our outlook for maturing loans, coupled with our view for a continued high
resolution rate for problem loans, drove us to be wary of premium super-senior securities.
2013 maturities had a reasonably high success rate
For 2013, we estimated that there were $32.6 billion of non-defeased conduit loans that
were scheduled to mature over the calendar year as of October 20121. We present the
pay-off rate, so far, for the $25.6 billion conduit loans that were scheduled to mature in
the first ten months of the year in Exhibit 6. We have excluded from this table
November’s and December’s maturities, but already more than 50% of those loans have
prepaid as well.
Exhibit 6: Status of 2013 maturities by loan term through October’s remits
5-Yr Term 7-Yr Term 10+-Term Total
Prepaid 65.5% 52.0% 56.2% 56.2%
Paid At Maturity 5.4% 14.8% 27.1% 24.4%
Paid Post Maturity 7.2% 2.8% 8.0% 7.3%
Total Paid 78.1% 69.6% 91.3% 87.8%
Liquidated 2.5% 2.0% 1.4% 1.6%
Extended 16.1% 5.6% 1.0% 2.4%
Outstanding Post Maturity 3.3% 22.7% 6.2% 8.2%
Total Not Paid 21.9% 30.4% 8.7% 12.2%
Source: Credit Suisse, Trepp
The pay-off success rate is nearly 88% for this set of loans and is likely to edge higher in
the coming months as many loans in the “outstanding post maturity” category are
resolved. By contrast, at the same point last year, the 2012 maturities had only a 70%
success rate. While some of this was driven down by a much bigger and less successful
5-year bucket (54%), the 10-year maturity category was lower too (86%).
1 We define the coming year maturities as of October of the prior year to account better for the loans that were scheduled to mature
in the early part of the year (like January) but paid off in the months prior to their maturity date. Defining the universe as of January would have eliminated these loans and biased the pay-off percentage lower.
30 October 2013
CMBS Market Watch Weekly 11
For the loans that paid off, most did so prior to, or at, their maturity, but an additional 7% of
loans that came due paid off in the months following their due date, with loans maturing
earlier in the year having more time to do so.
There was also 12% of the universe that failed to pay off. Most of these loans remain
outstanding and have not yet been officially extended. Over time, they will either receive
an extension, pay off post their maturity, or be liquidated.
Interestingly, there was over $3.7 billion of loans from the 2006 to 2008 vintages
scheduled to mature in the first ten months 2013. Of these 74% successfully paid off.
Interest rates have started to rise
As rates started to rise mid-year, we noted that in looking at the credit indicators, one of
the first places we may see any negative impact is on the refinancing rate. So far, despite
the increase, the pace of maturing loans refinancing does not seem to have slowed. In
fact, loans set to mature in the first six months of the year had a slightly lower pay-off
success rate (87.4%) than loans that came due in the next four months (88.4%), despite
the former having more time to pay off post maturity.
Nevertheless, there has been a meaningful rise in conduit lending rates over the past few
months. In Exhibit 7, we show the 90-day moving average mortgage rate, weighted by
loan size, on newly originated conduit loans (the red line).
Conduit interest rates fell consistently from January 2012 to May 2013. However, rates
rose approximately 100 bp over the next four months. We cut off the data in September
due to a declining sample size.
There appears to be a strong (negative relationship) between the level of rates and
origination volumes, and as rates rose in the third quarter, the average daily conduit
volume appears to have fallen. At this point it is too early to say if this was due to higher
lending rates or other factors (such as concern over the government shutdown and the
debt ceiling). Additionally, we note that this only measures origination volumes of
mortgages that back deals that have priced. We may see more August and September
originated loans come to market in deals brought over the next few weeks.
Of course, as the above statement reminds us, there are many other factors that can
impact both origination volumes and lending rates. Nevertheless, we believe that, at least
at the moment, the level of rates is an influential factor and the quick rise in interest rates
is likely to lead to a relative decline in origination volumes, at least over the near term.
Exhibit 7: 90-day average conduit origination and coupon estimates
0
20
40
60
80
100
120
140
160
1804.0
4.5
5.0
5.5
6.0
6.5
Oct-
11
No
v-1
1
De
c-1
1
Jan
-12
Fe
b-1
2
Ma
r-1
2
Ap
r-12
Ma
y-1
2
Jun
-12
Jul-
12
Au
g-1
2
Se
p-1
2
Oct-
12
No
v-1
2
De
c-1
2
Jan
-13
Fe
b-1
3
Ma
r-1
3
Ap
r-13
Ma
y-1
3
Jun
-13
Jul-
13
Au
g-1
3
Se
p-1
3
Coupon for 10-year loans
Average daily origination
$mn% rate
Note: The origination coupon rate is for 10-year conduit loans with an LTV greater or equal to 65%. Source: Credit Suisse, Trepp
30 October 2013
CMBS Market Watch Weekly 12
What is scheduled to mature
We estimate that across the CMBS universe there is currently $47 billion of non-defeased
loans scheduled to mature in 2014 (Exhibit 8). This includes not only $36.9 billion of conduit
loans but, in addition, $4.5 billion of floaters and $6.0 billion of single-borrower transactions.
Not included in the 2014 number is the $19 billion of loans that were set to mature in 2013,
or before, that are past their maturity date (and have not been officially extended). There is
also about $19.0 billion in defeased vintage conduit loans (not included in the above
statistics) that should not present any problems paying off.
Exhibit 8: Maturity profile by deal type Exhibit 9: Maturity profile by vintage type
0
20
40
60
80
100
120
140Single Borrower
Floater
Conduit/Fusion
$bn
19
47
89
127131
12 9 12 19
34 39
1 5 0 2
0
20
40
60
80
100
120
140New vintage(2009+)
Vintage (Pre-2009)
$bn
19
47
89
127131
12 9 12 19
34 39
1 5 0 2
* 2013 maturities and past due loans. Source: Credit Suisse
* 2013 maturities and past due loans. Source: Credit Suisse
The 2014 total is higher than the past year’s maturing loan total. Over the next several
years we see the amount increase, peaking in 2016 and 2017.
It is also interesting to look at how these totals have changed since last year. The 2014
and 2015 maturities have dropped between $9 to $10 billion, for each vintage, versus last
year’s estimate. This is a significant change. The reduction has been slightly smaller for
the 2016 and 2017 maturity totals, down $7 billion and $4 billion, respectively. The overall
decline can be attributed to prepayments, defeasance, and the liquidation of problem loans.
It is also worth noting that about 6.5% of the maturities over the next four years is
comprised of post-crisis originated loans (Exhibit 9). The percentage runs between 5.2%
and 6.7% each year. Then starting in 2018, the majority of maturities come from these
2010 and later vintages.
Our approach to estimating refinance risk
We have, over the past two years, developed and enhanced a rubric to help estimate the
pay-off rate for upcoming maturities based on what was able to be successfully refinanced
over the prior year.
In our approach, we have assigned each of the loans that was scheduled to mature over our
sample time period from the 2013 maturity to a group based on two credit characteristics:
its debt yield and what we call the “anticipated” DSCR. In both cases, to estimate these,
we considered the last reported net cash flow as an estimator of future cash flows.
The “anticipated” DSCR is based on the last reported cash flow and an estimated debt
service payment. The estimated debt service payment is calculated assuming the existing
mortgage is refinanced into a new, 10-year term, 30-year amortizing loan at the mortgage
rate that prevailed at the time of the loan’s pay-off (as shown Exhibit 7), varying the
refinancing rate based on market rates.
30 October 2013
CMBS Market Watch Weekly 13
Once bucketed, we then calculated the probability of pay-off for each of these groups,
based on the success rate of the past year’s maturities in that cohort. For example, for a
performing loan that had an “anticipated” DSCR between 1.5x and 1.6x and a debt yield in
the range of 9% to 10%, we calculated a 90% probability of refinancing. But a performing
loan, with the same debt yield and a DSCR between 1.0x and 1.1x, only had a 75%
probability of paying off. Non-performing loans were given separate treatment, generally
resulting in low pay-off rates.
To come up with this matrix, we analyzed CMBS conduit loans that were scheduled to
mature over the first ten months of 2013. Although going back further in time would have
provided a larger data set, it also would have encompassed a period that was less
representative of the current commercial mortgage financing environment.
While we acknowledge that this methodology is simplistic and does not take into account
each mortgage’s individual characteristics, we believe it is an adequate starting point for
estimating the sensitivity of pay-off rates across the aggregated CMBS universe.
Refinance rate estimates and sensitivity to rate moves
As a final step, we applied this matrix of calculated refinancing probabilities to each of the
upcoming conduit maturities across legacy CMBS, based on the DSCR/debt yield bucket it
fell into. To start, we assumed that the current CMBS loan rate is 5.5% ‒ this is a little
higher than where we have seen the most recent conduit origination levels.
For the 2014 conduit maturities, this gives us an overall pay-off success rate of 83%. By
way of comparison, it is a little lower than the 88% rate for the 2013 maturities we noted
above. If we expand this analysis for the legacy maturities from 2014 to 2017, the
projected refinance rate falls to 77%.
Exhibit 10: Base case refinance rates and sensitivity to rate moves by maturity
Maturity Balance ($mn)
Average Coupon (%)
Rates down 50 bp 5.00%
Rates Unchanged
5.50%
Rates up 50 bp 6.00%
Rates up 100 bp 6.50%
Rates up 150 bp 7.00%
2013 * 1,776 6.0 67.6% 66.9% 66.0% 65.1% 64.1%
2014 36,226 5.6 84.4% 83.4% 82.2% 81.1% 80.0%
2015 82,366 5.4 83.1% 81.9% 80.6% 79.3% 78.0%
2016 117,035 5.9 76.8% 75.5% 74.2% 72.9% 71.6%
2017+ 140,933 5.8 75.4% 74.1% 72.8% 71.5% 70.3%
Total 378,336 5.7 78.3% 77.1% 75.8% 74.5% 73.3%
* Only the remaining maturities in December 2013 were included. Outstanding matured loans were excluded. Source: Credit Suisse, Trepp
The exhibit shows that the later maturity years have generally lower estimated refinance
success rates, falling from 83% in 2014 to 74% in 2017’s (and later) maturities.
These estimated pay-off rates are slightly better than what we estimated a year ago
despite being in a higher rate environment. We attribute part of that to using the 2013 pay-
off experience (which has proved better than 2012). In addition, the refinance rates likely
got a small boost as a result of the declining percentage of outstanding delinquent loans
since we assume these loans automatically will not be able to refinance (except for 30 day
and performing matured, for which we consider a portion will pay off).
To get an idea of sensitivities to interest rates, we then repeated this estimation process
but varied the assumed rate of the new CMBS loan, up and down, in 50 bp increments.
We show the resulting estimates for the entire universe in Exhibit 10.
30 October 2013
CMBS Market Watch Weekly 14
So, for example, if the prevailing mortgage rate were to rise by 50 bp to 6.0%, we
estimate the successful refinance rate across the conduit universe would decline but
only by about 1%, to 75.8%. For small moves in the interest rate, the refinance rate is
less sensitive than we would have initially thought. Of course, any rate move will likely
also see other aspects of the lending environment change, including property values,
availability of financing, and leverage. We have not attempted to capture these other
potential changes in our simplified model.
Lastly, we looked at the estimated pay-off rate by vintage. Not surprisingly, as one goes
from the 2005 to the 2007 vintage, the expected pay-off rate falls. However, even in the
base case, we expect about 71% of the 2007 vintage will be able to refinance successfully
if borrowing conditions remain static.
Exhibit 11: Base case refinance rates and sensitivity to rate moves by vintage
Maturity Balance ($mn)
Average Coupon (%)
Rates down 50 bp 5.0%
Rates Unchanged
5.50%
Rates up 50 bp 6.00%
Rates up 100 bp 6.50%
Rates up 150 bp 7.00%
2005 79,576 5.4 83.8% 82.6% 81.4% 80.1% 78.8%
2006 117,143 5.8 79.1% 77.9% 76.5% 75.2% 73.9%
2007 142,412 5.8 72.7% 71.4% 70.1% 68.8% 67.7%
2008 8,438 6.3 79.0% 77.7% 76.2% 74.6% 73.4%
2005-2008 347,569 5.7 77.6% 76.3% 75.0% 73.7% 72.4%
Total 378,336 5.7 78.3% 77.1% 75.8% 74.5% 73.3%
Source: Credit Suisse, Trepp
30 October 2013
CMBS Market Watch Weekly 15
Technical update
Exhibit 12: US CMBS pipeline
Deal type Rate type Size ($ million)
October 2013
Wells Fargo, RBS - WFRBS 2013-C17 (Deal is in the market) Multiple Borrower Fixed 904
Swan and Dolphin Hotels - BAMLL 2013-DSNY (Deal is in the market) Single Borrower Floating 345
November 2013
Blackstone Hilton Single Borrower Fixed/Floating 3,500
Morgan Stanley, Bank of America Multiple Borrower Fixed 1,300
Goldman, Citi, Jefferies, Rialto, MC-Five Mile - GSMS 2013-GC16 (Deal is in the market) Multiple Borrower Fixed 1,134
Citi, Goldman, Starwood Multiple Borrower Fixed 1,250
JP Morgan Multiple Borrower Fixed 1,250
JP Morgan (Fontainebleau Miami Beach) Single Borrower Floating 845
Vornado Realty (Independence Plaza apartments) Single Borrower Fixed 440
JP Morgan (Marriott Waikiki) Single Borrower Floating 350
Citi, Wells Fargo (Rockwood Capital hotel portfolio) Single Borrower Floating 300
December 2013
Deutsche Bank, Cantor Fitzgerald, UBS Multiple Borrower Fixed 1,500
Morgan Stanley, Bank of America, CIBC Multiple Borrower Fixed 1,400
Goldman, Citi, MC-Five Mile Multiple Borrower Fixed 1,250
JP Morgan (Aventura Mall) Single Borrower Fixed 1,200
Wells Fargo, RBS Multiple Borrower Fixed 1,100
Announced Total 18,068
Source: Credit Suisse, Commercial Mortgage Alert, Commercial Real Estate Direct
Exhibit 13: 2013 CMBS issuance (in $ millions)
Month
Multi-
Borrower
Floating
Rate
Single
Borrower Other
2013
US Total
2013
Non-US Total
2013
Global Total
US Agency
CMBS*
US Resecur./
CDO
January 5,182 0 3,120 0 8,302 0 8,302 5,789 177
February 4,117 0 2,987 0 7,104 1,023 8,126 5,693 459
March 2,510 0 3,673 484 6,666 1,460 8,126 7,424 0
April 5,592 505 1,560 109 7,766 0 7,766 7,973 73
May 3,983 0 1,959 57 5,999 1,414 7,413 8,152 0
June 5,173 0 775 0 5,948 3,514 9,462 5,051 0
July 4,037 135 800 219 5,190 403 5,593 6,213 0
August 5,365 0 1,060 825 7,249 271 7,521 3,441 0
September 3,239 0 425 186 3,850 386 4,236 5,381 406
October 4,935 0 1,435 147 6,517 0 6,517 4,789 0
Total 44,133 640 17,793 1,878 64,443 8,471 72,914 58,081 1,115
* Multiple-pool Agency CMBS transactions only (i.e. deal tickers with GNR, FREMF, FNA, GEMS, MFMEG, SBAP and SBIC). Standalone DUS MBS and GN MBS pools are not included. Source: Credit Suisse, Commercial Mortgage Alert
30 October 2013
CMBS Market Watch Weekly 16
Relative Value Monitor
Exhibit 14: 10-year sector – CMBS, REIT, and corporate spreads
128.8
131.6
100.7
80.0
90.0
100.0
110.0
120.0
130.0
140.0
150.0
160.0
170.0
May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13
Sp
rea
ds to
US
T
CMBS AAA
REIT BBB Index
Corporate A
Source: Credit Suisse
Exhibit 15: 5-year sector Exhibit 16: 10-year sector
Δ bps 3-month
10/29/13 10/22/13 High Low Average
UST Yield 1.26 -2 1.84 1.26 1.48
Swap 16 -0 19 14 17
AAA CMBS 216 -0 219 214 217
LUCI Single-A 63 -1 77 63 70
Δ bps 3-month
10/29/13 10/22/13 High Low Average
UST Yield 2.50 -1.00 2.98 2.49 2.71
Swap 15 0 20 13 16
AAA CMBS 129 -1 138 117 130
FNMA DUS 82 -3 93 81 85
LUCI Single-A 101 0 119 100 109
Note: Liquid U.S. Corporate Index is an investment-grade, corporate bond index consisting of ~800 liquid, US dollar-denominated issues, priced daily and rebalanced monthly by Credit Suisse. Source: Credit Suisse
Note: Liquid U.S. Corporate Index is an investment-grade, corporate bond index consisting of ~800 liquid, US dollar-denominated issues, priced daily and rebalanced monthly by Credit Suisse. Source: Credit Suisse
30 October 2013
CMBS Market Watch Weekly 17
Exhibit 17: CMBX prices as at October 29, 2013
CMBX 6 (CMBX 2013-1) AAA AS AA A BBB- BB
Current Price 96.56 97.88 98.69 98.61 95.05 92.95
Change vs. Prior Week 0.14 0.1 0.17 0.39 0.61 1.15
Minimum (since inception) 93.60 93.80 94.15 93.10 86.67 86.43
Maximum (since inception) 98.16 99.94 101.38 102.54 101.31 102.05
Average (since inception) 96.18 97.16 97.95 97.81 93.62 92.84
Standard Deviation 1.00 1.32 1.78 2.53 3.37 3.54
# of Std. Dev. 0.38 0.54 0.42 0.32 0.42 0.03
CMBX 5 (CMBX 2008-1) AAA AM AJ AA A BBB BBB- BB
Current Price 97.34 90.44 75.07 49.49 27.99 17.04 13.62 4.96
Change vs. Prior Week 0.16 1.09 1.11 0.2 0.05 0 0 0
Minimum (18 mo.) 90.54 76.29 57.29 41.42 26.25 16.92 13.43 4.80
Maximum (18 mo.) 97.74 91.34 78.19 52.38 31.33 18.27 14.41 5.20
Average (18 mo.) 95.35 85.39 68.07 46.48 27.39 17.51 13.83 4.97
Standard Deviation 1.91 4.03 4.90 2.31 0.93 0.42 0.27 0.05
# of Std. Dev. 1.04 1.25 1.43 1.30 0.64 -1.14 -0.78 -0.25
CMBX 4 (CMBX 2007-2) AAA AM AJ AA A BBB BBB- BB
Current Price 97.39 91.85 75.26 43.12 24.68 15.90 12.89 4.81
Change vs. Prior Week 0.1 0.32 0.78 0.49 0.14 -0.16 -0.13 0
Minimum (18 mo.) 89.50 76.05 54.02 32.84 22.48 15.68 12.59 4.43
Maximum (18 mo.) 98.44 93.26 78.64 45.47 27.37 18.03 14.34 5.02
Average (18 mo.) 95.02 86.06 66.89 37.94 23.85 16.96 13.66 4.94
Standard Deviation 2.34 4.64 5.46 2.45 0.94 0.62 0.44 0.09
# of Std. Dev. 1.01 1.25 1.53 2.11 0.88 -1.72 -1.75 -1.46
CMBX 3 (CMBX 2007-1) AAA AM AJ AA A BBB BBB- BB
Current Price 97.25 92.88 75.38 32.94 14.92 7.54 6.53 4.76
Change vs. Prior Week 0.16 0.37 0.83 0.6 0.01 -0.06 -0.06 0
Minimum (18 mo.) 89.85 78.43 56.38 29.03 13.38 7.50 6.46 4.38
Maximum (18 mo.) 98.16 94.36 79.67 40.69 22.61 10.00 8.47 5.00
Average (18 mo.) 95.14 87.68 68.27 33.59 18.02 8.66 7.36 4.91
Standard Deviation 2.04 3.92 4.82 2.02 2.09 0.63 0.44 0.10
# of Std. Dev. 1.04 1.33 1.48 -0.32 -1.48 -1.77 -1.89 -1.50
CMBX 2 (CMBX 2006-2) AAA AM AJ AA A BBB BBB- BB
Current Price 98.16 95.77 88.00 64.49 30.00 12.46 9.13 4.81
Change vs. Prior Week 0.1 0.22 0.32 0.7 0.42 0.02 0.02 0
Minimum (18 mo.) 92.83 84.45 70.77 53.15 29.21 12.37 9.02 4.30
Maximum (18 mo.) 98.76 97.24 91.02 71.15 41.77 14.84 10.80 5.04
Average (18 mo.) 96.63 92.10 81.90 60.45 35.43 13.72 9.95 4.93
Standard Deviation 1.42 3.24 4.75 3.73 3.03 0.75 0.49 0.10
# of Std. Dev. 1.08 1.13 1.28 1.08 -1.79 -1.69 -1.67 -1.26
CMBX 1 (CMBX 2006-1) AAA AM AJ AA A BBB BBB-
Current Price 98.98 98.05 93.93 81.47 62.00 27.58 17.55
Change vs. Prior Week 0.09 0.1 0.35 0.51 0.73 0.1 0.86
Minimum (18 mo.) 95.27 89.00 81.42 65.27 53.76 25.86 15.97
Maximum (18 mo.) 99.41 98.71 95.83 84.37 68.67 34.48 17.89
Average (18 mo.) 97.86 95.35 89.98 75.88 58.75 29.16 16.72
Standard Deviation 1.04 2.45 3.49 4.59 2.64 3.04 0.50
# of Std. Dev. 1.07 1.10 1.13 1.22 1.23 -0.52 1.66
Source: Credit Suisse, Markit
30 October 2013
CMBS Market Watch Weekly 18
Recent publications The table below provides a link to some of our recent CMBS publications.
Date published Loans in the News
Oct-28 Portion of One Liberty Plaza loan sells (GSMS 2007-GG11 and CGCMT 2008-C7)
1440 Broadway trading for $528 million (GCCFC 2005-GG3)
Marquis Apartments set to trade for $70 million (BSCMS 2005-PWR7 and BSCMS 2005-
PWR8)
Oklahoma City Portfolio selling for $65 million (JPMCC 2006-LDP7)
COPT reveals lease renewal on conference call (LBUBS 2004-C2)
65 West 36th Street sells for $29 million (WBCMT 2007-32)
Oct-24 GGP pays off one more loan, another one coming (BACM 2004-2 and CSMC 2006-C1)
Last in 2006 floater liquidated at a loss (BALL 2006-BIX1)
Beige Book update
New credit issues fall further in October
Oct-21 New mod template on Riverchase posted (BACM 2006-6)
Aventura Mall set to refinance and defease (LBUBS 2007-C7)
Agreement to sell 500 West Madison (LBUBS 2005-C5)
BofA Plaza, backing a 2010 loan, is up for sale (RBSCF 2010-MB1)
Oct-17 Cash flow GG10s widen on sale of distressed loans (GSMS 2007-GG10)
Brookfield completes purchase of MPG Office (various)
Large loss likely from sale of Gwinnet Place from REO (MLMT 2007-C1)
Shoppingtown Mall update – Moonbeam is the buyer (LBUBS 2001-C3)
Stake in 1211 Avenue of the Americas trades (LBUBS 2006-C6 and LBUBS 2007-C7)
The Factory Building loan, in bankruptcy, may pay off (JPMCC 2006-CB15)
GGP is offering four malls for sale (JPMBB 2013-C14)
Cedar Center, backing a 2010 conduit loan, sold (GSMS 2010-C2)
Three DC-Area multifamily properties on the market (FREMF 2012-K709, FREMF 2012-K710,
FN AM4153)
Stuyvesant Town and PCV reappraised at $3.4 billion (various)
One Newark Center modified (BSCMS 2006-PW14)
Granite Run Mall liquidation leads to large, expected loss (COMM 2006-C7)
Several liquidations on HQ10 seen in October (HQ10)
Overlook III and 7000 Central Park liquidated (JPMCC 2007-LD12)
Oct-15 Estimated exposure to CW’s distressed auction
..
GLOBAL SECURITIZED PRODUCTS RESEARCH
Roger Lehman, Managing Director
Global Head of Securitized Products Research
+1 212 325 2123
Eric Miller, Managing Director
Global Head of Fixed Income and Economic Research
+1 212 538 6480
RESIDENTIAL MORTGAGES CONSUMER ABS
Mahesh Swaminathan, Managing Director Chandrajit Bhattacharya, Director
Group Head Group Head
+1 212 325 8789 +1 212 325 1546
[email protected] [email protected]
AGENCY MBS NON-AGENCY MBS Marc Firestein, Analyst
Mahesh Swaminathan, Managing Director Chandrajit Bhattacharya, Director +1 212 325 4379
Group Head Group Head [email protected]
+1 212 325 8789 +1 212 325 1546
[email protected] [email protected] CDO / CLO
Qumber Hassan, Director Marc Firestein, Analyst David Yan, Director
+1 212 538 4988 +1 212 325 4379 Senior Strategist
[email protected] [email protected] +1 212 325 5792
Vikram Rao, Vice President
+1 212 325 0709
CMBS
Roger Lehman, Managing Director Serif Ustun, Vice President, CFA Sylvain Jousseaume, Vice President, CFA
Group Head +1 212 538 4582 +1 212 325 1356
+1 212 325 2123 [email protected] [email protected]
MODELING AND ANALYTICS
David Zhang, Managing Director
Group Head
+1 212 325 2783
Tony Tang, Director
+1 212 325 2804
Yihai Yu, Director
+1 212 325 7922
Taek Choi, Vice President
+1 212 538 0525
Oleg Koriachkin, Vice President
+1 212 325 0578
Joy Zhang, Vice President
+1 212 325 5702
Andrew Zhang, Associate
+1 212 538 4181
LOCUS ANALYTICS
Brian Bailey, Director
Locus Analytics Specialist
+1 212 325 0182
Shana Bornstein, Vice President
Locus Analytics Specialist
+1 212 325 1083
LONDON JAPAN
Carlos Diaz, Vice President
+ 44 20 7888 2414
Tomohiro Miyasaka, Director
Japan Head
+ 81 3 4550 7171
Disclosure Appendix
Analyst Certification Roger Lehman, Serif Ustun, Sylvain Jousseaume and Tee Chew each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
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Emerging Markets Bond Recommendation Definitions Buy: Indicates a recommended buy on our expectation that the issue will deliver a return higher than the risk-free rate. Sell: Indicates a recommended sell on our expectation that the issue will deliver a return lower than the risk-free rate.
Corporate Bond Fundamental Recommendation Definitions Buy: Indicates a recommended buy on our expectation that the issue will be a top performer in its sector. Outperform: Indicates an above-average total return performer within its sector. Bonds in this category have stable or improving credit profiles and are undervalued, or they may be weaker credits that, we believe, are cheap relative to the sector and are expected to outperform on a total-return basis. These bonds may possess price risk in a volatile environment. Market Perform: Indicates a bond that is expected to return average performance in its sector. Underperform: Indicates a below-average total-return performer within its sector. Bonds in this category have weak or worsening credit trends, or they may be stable credits that, we believe, are overvalued or rich relative to the sector. Sell: Indicates a recommended sell on the expectation that the issue will be among the poor performers in its sector. Restricted: In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Not Rated: Credit Suisse Global Credit Research or Global Leveraged Finance Research covers the issuer but currently does not offer an investment view on the subject issue. Not Covered: Neither Credit Suisse Global Credit Research nor Global Leveraged Finance Research covers the issuer or offers an investment view on the issuer or any securities related to it. Any communication from Research on securities or companies that Credit Suisse does not cover is a reasonable, non-material deduction based on an analysis of publicly available information.
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