CMBS issuance in the first quarter fell 11% from a year earlier, according to Commercial Mortgage Alert. An estimated $20.4 billion of CMBS were issued in the first quarter of 2014, a decline from $22.9 billion a year ago. On an annualized basis, the pace of issuance is about $80 billion, less than 2013’s $86 billion and far short of the industry projection of roughly $100 billion for 2014. The pipeline for the second quarter of 2014 is roughly even with 2013 at $15 billion, so it looks like the second half of 2014 will need to be robust to hit the $100-billion mark.
“We are seeing declines in the origination pace in our target market, the small balance ($3-$20 million) borrower,” commented Michael D. Sneden, Executive Vice President at ValueXpress. “We are struggling to compete on rate against community banks on 5- to 7-year fixed-rate refinance deals in which the sponsor is not concerned about recourse. A creditworthy sponsor can find rates of 3.5-3.75% or lower from any number of commercial banks in the New York metro area.”
“But we still have an advantage on large cash-out transactions and transactions in which non-recourse is required,” said Gary Unkel, Senior Loan Originator at ValueXpress. “In addition, we are able to work transactions in which the sponsor has some credit issues that the community bank does not want to see.”
“I think we will continue to close a steady volume of cash-out transactions in 2014,” said Sneden. “Whether we can beat last year’s number may require a dip in rates, even if only for a short while, this summer or fall, so we can add some rate-sensitive transactions on top of the steady cash-out refinance business already in place.”