Three new issues of CMBS securities backed by newly originated commercial mortgages are making their way to eager investors. Commercial Mortgage Alert (CMA) reports that Goldman, Sachs & Co. priced a $400-million CMBS offering for Developers Diversified Realty (DDR), a shopping center REIT, on November 16, 2009 that was quickly snapped up at spreads tighter than original talk. According to CMA, the blended rate on the three classes of CMBS sold by GS&Co. was 4.2%. Factoring in transaction costs, it was estimated that the net interest rate to DDR was below 5.5% for the 28 properties securing the 5-year loans in the CMBS pool. The transaction was the first CMBS issue in 18 months. Subsequently, Bank of America priced a $460-million CMBS offering for Flagler Development on December 3, 2009. The blended rate on the four classes of CMBS was 5.8%. The bonds are backed by 7-year loans backed by mortgages on 44 office and industrial properties and other assets. Finally, on the same day, JPMorgan Securities launched a $500-million CMBS transaction that will provide financing for Inland Western Retail Real Estate Trust. The portfolio consists of 55 retail properties in 23 states in a joint venture owned by Inland Western and principals of The Inland Real Estate Group Inc. The portfolio contains 22 grocery-anchored centers. “We are watching all of these transactions for an impact on spreads for CMBS conduit loan originations,” commented Michael Sneden Executive Vice President of ValueXpress. “We have been buyers of CMBS securities earlier in the year, and we have been acutely aware of the spread compression in the senior investment grade (AAA-rated) classes of CMBS that has allowed these property owners access to the CMBS markets for portfolio execution. We believe these transactions will have a positive impact on single-property CMBS conduit loans going into 2010,” Sneden said.
