Capital Markets Update Week of 2/12
February 12, 2024
Private-Label CMBS and CRE CLOs
Year-to-date private-label CMBS and CRE CLO issuance totals $8.1 billion, more than double the $3.8 billion for the same period last year. In another busy week for the private-label market, three CMBS transactions, totaling $1.2 billion, priced, including:
- BX 2024-MF, a $550 million SASB backed by a floating-rate loan for Blackstone, secured by 10 multifamily properties.
- GSMS 2024-70P, a $395 million SASB backed by a fixed-rate loan for DTH Capital and Rose Associates, secured by a one-million sf mixed-use building at 70 Pine Street in Lower Manhattan.
- MCR 2024-HTL, a $281 million SASB backed by a floating-rate loan for MCR Hotels, secured by 16 hotels across 11 states.
CMBS lenders are expecting a strong resurgence in issuance in 2024, according to origination projections provided to Commercial Mortgage Alert. Lenders estimate 2024 volume will reach $98.5 billion, up 150% from the $39.3 billion in 2023.
CRE CLO Issuance. According to Commercial Mortgage Alert, CRE CLO issuers are forecasting $31.9 billion in volume, a more than four-fold increase over last year’s $6.7 billion.
Spreads Continue to Trend Tighter
- Conduit AAA and A-S spreads were unchanged at +93 and +135, respectively last week. Year to date, AAA and A-S spreads have tightened 23 bps and 30 bps, respectively.
- Conduit AA and A spreads were tighter by 15 bps and 25 bps to +175 and +275, respectively. Year to date, AA and A spreads have tightened by 50 and 100 bps, respectively.
- Conduit BBB- spreads were tighter by 35 bps to +725. Year to date, BBB- spreads have come in by 175 bps.
- SASB AAA spreads were tighter by 5 – 10 bps to a range of +130 to +160, depending on property type. Spreads have narrowed from +160 to +188 at the start of the year.
- CRE CLO AAA and BBB- spreads remained at +155 and +565, respectively. Spreads are tighter for the year by 45 bps and 35 bps, respectively.
Agency CMBS
- Agency issuance totaled $2.6 billion last week, consisting of $1.3 billion in Freddie K and Multi-PC transactions, $1.1 billion in Fannie DUS, and $196 million in Ginnie PLs.
- For the year, agency issuance stands at $10.7 billion, 6% higher than the $10.1 billion for same-period 2023.
The Economy, the Fed, and Rates…
- Equities on a Tear. A milestone was reached last week, with the S&P 500 topping 5,000 for the first time, setting a record high as investors continue to bet on a resilient economy. The Fed’s unlikely “soft landing” may become a reality with unemployment low and inflation seemingly under control.
- The Fed kept rates at a 22-year high for a fourth straight meeting in January, and while officials signaled their openness to cuts eventually, it may not happen as soon as some had hoped. As noted by Yung-Yu Ma, Chief Investment Officer at BMO Wealth Management: