Michael D. Sneden, Executive Vice President at ValueXpress,completed his first CMBS transaction with Donaldson Lufkin Jenrette (now Credit Suisse) in 1993. It was secured by a 412-unit apartment complex in St. Louis, Missouri. So you can imagine Mike was looking forward to reading CMBS veteran Manus Clancy’s recent piece on the history of CMBS over the past 25 years. Here are some highlights for you.
Did you know…
- Ethan Penner, considered the father of CMBS, pioneered the first “multi-borrower” CMBS transaction with Nomura in 1994? The deal was backed by nine loans against properties owned by different sponsors.
- Penner threw renowned parties that are still talked about today? At one event, he convinced the rock band The Eagles into reuniting to play for his CMBS crowd.
- the CMBS market survived its first market meltdown in 1998 when Russia defaulted on its debt and Long Term Capital Management (LTCM) was rescued by a group of investment banks? The CMBS market shut down for about three months and Penner resigned from Nomura (then known as Capital America) amid heavy losses.
- after a slowdown during the burst of the dot-com bubble and the 9/11 attacks, the CMBS market entered the go-go years of 2005-2007? This era saw “explosive jumps” in property values and a dramatic decline in interest rate spreads. As a result, a record $230 billion of CMBS was issued in 2007.
- the great recession shut down the CMBS market for 21 months beginning June 2008? But the resilient CMBS market staged yet-another comeback in 2009, when JPMorgan and Bank of America issued CMBS backed by a pool of large loans. Since 2013, CMBS issuance has been steady in the $75-$100 billion range.
The outlook for CMBS is stability. The market has seen several innovations through its 25-year history and it is expected to provide an additional funding source for commercial property owners for years to come.