At the same time, strong demand on newly issued CMBS securities is resulting in tight pricing. Recent CMBS issues have priced in the range of 65-70 basis points (bp) over 10-year swaps and spreads on the triple-B-minus tranche priced in the range of 260-300 bp. These levels are well inside other pandemic-era pricing and among the tightest since the global financial crisis.

As a result, interest rates on CMBS conduit loans are near record lows. Loan spreads in Term Sheets have decreased to 200-250 bp depending on loan size and leverage, and adding the current 10-year swap of 1.25% results in rates of 3.25%-3.75%. It’s time to lock in these rates while they are available. For current CMBS conduit loan spreads and interest rates, click here. For a free, no-obligation CMBS conduit loan quote, please contact Michael Sneden (msneden@valuexpress.com) or Gary Unkel (gunkel@valuexpress.com).

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Lument, the New York bridge lender formerly known as ORIX Real Estate Capital, is preparing its first deal since it merged three originators and rebranded in October. It is expected to begin tapping the market regularly again.

Charlotte-based Barings, another bridge lender, is tentatively slated to launch its debut deal in the second half of 2021.Barings is building its staff. It has a deep-pocketed parent in MassMutual and vast experience with corporate CLOs. That side of its business issues in the United States and Europe, and has long been among the more active producers, with 11 deals totaling $4.2 billion during the pandemic.

Those who have issued CRE CLOs since the onset of the coronavirus crisis last year include a mix of lenders that rely heavily on the capital markets, such as Arbor Realty, Bridge Investment, LoanCore Capital and MF1 REIT, as well as others that are more opportunistic, such as Starwood Property. The latter is among shops that have ready access to many forms of cheap capital and typically tap the CLO market only when spreads are very tight.

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The Federal Reserve lowered its benchmark interest rate by half a percentage point to a range between 1.00% and 1.25%, citing economic risks posed by the coronavirus outbreak. This was the first cut between scheduled policy meetings since October 2008, and the cut surprised investors who were waiting for action at the March meeting in two weeks.

The 10-year swap rate, the benchmark for setting CMBS conduit loan interest rates, has fallen to a record low of 0.97% in response to the outbreak. Meanwhile, CMBS securities pricing has widened, but not nearly as much as swaps have fallen. AAA-rated CMBS spreads have risen from Swaps plus 80-90 bp to Swaps plus 90-110 bp.

As a result, loan spreads in Term Sheets have increased 25 bp to 250-275, but with Swaps at essentially 1.0%, CMBS conduit loan rates are in the 3.5-3.75% range for full-leverage loans, the lowest in the history of CMBS lending.

For a free, no-obligation loan quote at these historically low rates, contact a member of the ValueXpress team: Mike Sneden (mikes@valuexpress.com), Dennis Suh (dsuh@valuexpress.com) or Gary Unkel (gunkel@valuexpress.com).

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New loan requests are surging for ValueXpress as interest rates for CMBS conduit loans have plummeted to the lowest levels in history. Recall that the interest rate on a 10-year fixed-rate CMBS conduit loan consists of the 10-year swap rate plus the loan spread. The swap rate has declined steadily since reaching a multi-year high of 3.30% in November 2018. On its way down, the swap last saw 2.50% in April and fell to 2.00% at the beginning of August before diving 50 basis points (bp) over a one-week period at the beginning of August. It hit a recent low of 1.33% on September 3.

Normally when the swap rate declines, loan spreads increase to provide investors in CMBS an adequate return. In this instance, loan spreads have move up slightly, perhaps 15-25 bp, nowhere near the almost 200 bp decline in the swap rate.

“Based on this perfect confluence, we are offering the lowest interest rates in my 25-year career originating CMBS conduit loans,” commented Michael D. Sneden, Executive Vice President at ValueXpress. “Low leverage multifamily, office, retail and industrial deals are below 4%. Hospitality is only a touch higher. Even high leverage and small balance deals are being quoted with rates in the 4.25% area.”

“I am urging our clients who have yet to pull the trigger on a CMBS loan for the purchase or refinance of an eligible property not to wait,” commented Dennis Suh, Senior Vice President at ValueXpress. “While the swap has now stabilized in a 1.40-1.50% range, it may not stay there for long.” To lock in these low rates, contact Michael Sneden (msneden@valuexpress.com), Dennis Suh (dsuh@valuexpress.com) or Gary Unkel (gunkel@valuexpress.com).

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The government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac saw the second-highest volume, at $142.3 billion, and they were followed by commercial mortgage-backed securities (CMBS) issuers, life insurance companies and pension funds, and REITS, mortgage REITS and investment funds.

CMBS issuance in the United States totaled $77.0 billion, down 12% from 2018’s total of $87.8 billion. CMBS loan origination volume in 2018 was lower than in 2017 due to fewer loan maturities, tighter credit standards and strong competition from commercial bank lenders and Fannie Mae/Freddie Mac for multifamily loans.

The post 4.4.19: Commercial and Multifamily Mortgage Bankers Close a Record $573.9 Billion of Loans in 2018! appeared first on VALUEXPRESS - Commercial Mortgage Loans.

So CMBS conduit loan originators gleefully watched the 10-year Swap rate steadily decline from a near-term peak of 2.42% at the end of December 2014 to a low of 1.82% in the first week of February 2015. Since the interest rate charged borrowers on CMBS conduit loans consists of the swap rate plus the loan spread, a watchful eye was also on loan spreads to see if they would increase, wiping out the benefit of the declining swap spread. But loan spreads, determined by the market for CMBS securities, generally remained flat. So the majority of the decline in the swap rate resulted in lower loan rates for CMBS borrowers.

“The decline in the swap rate in the beginning of February resulted in CMBS conduit loan rates below 4% for full-leverage, 10-year fixed-rate loans,” commented Michael D. Sneden, Executive Vice President at ValueXpress. “These are amazing rates! Rates under 4% for large, 50% LTV loans are common, but sub-4% for highly leveraged, small balance (< $10 million) conduit loans is a first in the history of CMBS lending.”

Alas, the sub-4% rates were short lived. After bottoming in the first week of February, stronger economic news lifted the 10-year Swap rate to 2.20% in mid-February, increasing CMBS conduit loan rates well above 4% once again for full-leverage, 10-year fixed-rate loans.

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The official interest rates should be published by September 12, but it is expected that the low rates for the debenture sales this month will result in estimated effective interest rates for small business borrowers – including servicing fees – of only 4.69% for a 20-year loan. For a 10-year loan, the estimated effective interest rate is a low 3.75% for September.

The SBA’s 504 loan program provides long-term, fixed-rate financing for small business owners nationwide. Since the program’s inception, 504 loans have funded over $62 billion in loans to over 130,000 small businesses. In turn, those small businesses have created or retained over 2.1 million jobs for the U.S. economy. Certified Development Companies (CDCs) continue to work with small business owners who are taking advantage of these record-low interest rates to purchase, build and expand their facilities or purchase capital-intensive machinery and/or equipment.

SBA 504 loans are designed to cover up to 40% of a project’s costs with a maximum of $5 million in funding; however, the CDC partners with a bank that provides 50% of the project financing and the borrower typically puts in 10% as a down payment.

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In January, the delinquency rate for U.S. commercial real estate loans in CMBS jumped 14 basis points (bp) to 9.34%. That is the highest percentage of loans 30-plus days delinquent, in foreclosure or REO in the history of the CMBS market.

TABLE 1

While the rate continues to head higher, optimists can point to the fact that the rate of increase is significantly smaller than it was in the prior two months. In November, the delinquency rate stepped up 35 bp from October, and in December it was up 27 bp from November. Pessimists can counter with the fact that the jump comes despite the fact that new issues continue to make their way into the calculation and servicers continue to resolve troubled loans. The new deals – which theoretically should have low delinquencies for a while – will continue to put downward pressure on the rate as issuance continues to grow in 2011. Similarly, the resolution of troubled loans will also help to reduce the rate.

TABLE 2

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