The COVID-19 pandemic has temporarily suppressed new CMBS loan originations, resulting in fewer CMBS securities available to investors. With CMBS bond buyers flush with new annual capital allocations for CMBS and a shortage of securities, spreads continue to tighten, benefitting CMBS loan borrowers. CMBS securities prices are important to borrowers because the loan spreads found in CMBS conduit loan Term Sheets are derived from CMBS securities prices. Tightening CMBS securities prices will quickly find their way into lower loan spreads in Term Sheets.
During the pandemic, the benchmark AAA-rated class of CMBS securities rose from 80-90 basis points (bp) over swaps to nearly 175 bp, resulting in borrower loan spreads rising to over 300 bp. However, in the past few months, since U.S. vaccination programs have progressed and with stimulus money in consumers’ pockets, the risk profile for CMBS investments has markedly improved. As a result, the AAA-rated class of CMBS spreads have tightened to 65-70 bp over swaps, lower than pre-pandemic levels, and loan spreads to borrowers have fallen to 200 bp for large, low-leverage deals and the 250 bp area for smaller, high leverage loans.
ValueXpress has completed over 1,000 CMBS conduit loans. Please contact Michael Sneden (firstname.lastname@example.org) or Gary Unkel (email@example.com) for a free, no-obligation CMBS conduit loan quote for your property.