Spreads on CMBS securities declined in June, positively impacting CMBS conduit loan rates. The benchmark AAA-rated super-senior CMBS closed the month at 115 basis points (bp) over swaps, down from 145 bp over swaps on June 1. Super-senior AAA-rated CMBS spreads peaked in March during the height of the COVID-19 pandemic at 315 bp over swaps and have declined steadily since. Prior to the pandemic, spreads were at roughly 80 bp over swaps. Spreads on other classes of CMBS have also declined in June. Market professionals see super-senior AAA-rated CMBS spreads slowly grinding lower if COVID-19 infections, which are spiking in certain areas of the United States, begin to decline.
CMBS conduit loan spreads are declining in relation to the drop in AAA-rated CMBS spreads. In March, loans spreads found in CMBS Term Sheets were over 400 bp. As of the end of June, loan spreads declined to 300-350 bp. With the 10-year swap at 0.65% today, CMBS conduit loan rates are 3.65%-4.15%.
As a refresher, loan interest rates for 10-year CMBS conduit loans are set by adding the 10-year Swap rate and the loan spread found on your CMBS conduit loan Term Sheet. For example, if the loan spread is 350 bp (3.50%) and the 10-year Swap rate is 0.65%, the loan rate is 3.50% plus 0.65%, or 3.65%. The loan spread is derived from CMBS securities prices outlined above. The two indexes are added together at loan closing to set the interest rate, which is fixed for ten years. For current CMBS conduit loan spreads and interest rates, click here.
ValueXpress is actively seeking new CMBS conduit loans. We are pursuing multifamily, manufactured housing community (MHC), self-storage, industrial, retail and office loans. Hotel loans remain on pause unless the hotel’s performance was unaffected by COVID-19. We are seeking both permanent loans for stabilized properties and bridge loans for properties in process of stabilization.
