Larger commercial mortgage-backed securities deals are starting to come back to the market just 15 months after a few smaller transactions priced following a period of dormancy, according to an S&P research note this week. The return of the market, referred to as CMBS 2.0, began in late 2009 with three single-borrower transactions that are not as complex as some of the more recent deals, S&P said.
“Three $1.2 billion-plus conduit/fusion deals were issued this month, each of which included an average of ten principal and interest bonds and two interest-only classes,” said S&P analyst James Manzi. “Compared with late-2009 issuances, the newer multi-borrower deals have higher leverage, less debt-service coverage, and somewhat looser underwriting.”
The report noted that the ten most recent CMBS transactions were valued well below peak levels reached in 2007, but the amounts issued in the more recent transactions trump the single-borrower deals valued at $453 million that came to market in 2009, according to Credit Analyst Brian Snow.
“Compared with the first two single-borrower deals in late 2009, issuer loan-to-value ratios are up about 10% and debt-service coverage ratios are down quite a bit,” S&P Analyst Kurt Pollem said. “Additionally, rating agency stressed loan-to-values have shifted upward — to the low 90s most recently — and stressed debt-service coverage ratios have trended down to about 1.2x from 1.5.”