CMBS spreads are slowing declining after widening dramatically in August; however, the market did not see a new multi-borrower conduit deal price after mid-August, so dealers noted that the spread improvement was based on secondary market trades. The last new multi-borrower CMBS deal to price was the $1.2-billion offering by Cantor Commercial Real Estate, Deutsche Bank, Ladder Capital and Nataxis on August 13. The super-senior AAA-rated bonds priced at 90 basis points (bp) over swaps, a 19 bp surge over the post-crash low of 71 bp achieved in July.
Issuers are now shopping two conduit deals expected to price next week. Initial indications are the super-senior AAA-rated bonds should price in the 85 bp area, a 5 bp improvement over the Cantor deal, but still well wide of the July low. These two deals are the first of a flurry of deals expected to price in September that could total $15 billion, including single-borrower transactions as well as multi-borrower conduit deals. Junior CMBS classes are also expected to price at levels 5-10 bp lower than the Cantor deal.
“We are just hoping for stable spreads,” commented one conduit lender. “We can deal with the higher spreads versus the July lows, but we just need them to stay in a range that keeps our borrower quotes in the money. We have some older applications in processing that are underwater versus our profit benchmark at swaps +90, but we can hold at swaps +80; we are just going to have to see how spreads shake out here in September to determine how we will approach our borrowers in terms of loan spreads on these applications.”