CMBS prices remained in a tight range during the last 30 days in which four CMBS deals priced. The benchmark long-term, super-senior bonds from the first issue, a $1-billion offering by Citigroup, Goldman Sachs, MC-Five Mile and Cantor Fitzgerald, priced on February 28 at 93 basis points (bp) over swaps, within the range of 87-95 bp of issues since the beginning of 2014. Further down the capital stack, Class AS CMBS priced at 125 bp over swaps, and the Class Bs from the deal priced at 170 bp over swaps.
Next up, Deutsche Bank, UBS, Key Bank and Cantor priced the long-term super-senior bonds from a $1.2-billion offering on March 4 at 92 bp over swaps. The Class AM and B priced at 115 and 165 bp over swaps, respectively. Soon after, Wells Fargo, RBS, Liberty Island and Basis Investment priced the senior bonds from a $1.1-billion offering at 89 bp over swaps. The Class AM and B priced at 105 and 150 bp over swaps, respectively.
The most recent issue, a $927-million offering by Ladder Capital, Deutsche Bank and Natixis, priced the long-term super-senior bonds on March 14 at 92 bp over swaps, and Class AM CMBS priced at 110 bp over swaps, while the Class Bs from the deal priced at 150 bp over swaps.
“CMBS issuers and traders thrive in a stable market like we have seen so far in 2014,” commented Michael D. Sneden, Executive Vice President at ValueXpress. “The stability is allowing CMBS conduit lenders to lower their spreads despite CMBS prices being range-bound, as some volatility risk is removed from their spreads. Plus the trend for the mezzanine AAA/AA- CMBS is tighter, which is helping shrink borrower spreads as well.
“We are seeing spreads in the 210-225 bp area for full-leverage small-balance commercial assets and 250 bp area for hotels,” commented Gary Unkel, Senior Loan Originator at ValueXpress. “With the 10-year Swap Rate (Swap) Index hovering around 2.80%, all-in rates to borrowers are falling below 5%. Low leverage deals and/or higher loan balances can be well under 5%.”