CMBS Could Be Catching a Break

Trepp headquarters in New York City; the firm sees last week’s trio of conduit deals as an encouraging sign for CMBS.

NEW YORK CITY—Following a lackluster first-quarter for issuance and assorted headwinds that have led analysts to scale back their full-year predictions considerably, some rays of sunshine have begun to peak through the clouds surrounding the CMBS market. As GlobeSt.com reported Monday, the House of Representatives has passed a bill that could mitigate some of the more onerous aspects of the risk-retention rule mandated under Dodd-Frank. Also on Monday, Trepp LLC reported that three conduit deals totaling $2.3 billion came to market in the space of a few days, marking “one of the most active issuance weeks in months,” as research analyst Catherine Liu put it.

Two of the three multi-borrower deals in question, Credit Suisse’s CSAIL 2016-C6 at $767.5 million and Goldman Sachs’ $750.6-million GSMS 2016-GS2, benefited from low levels of leverage, according to Liu. In its presale report on GSMS 2016-GS2, Kroll Bond Rating Agency noted that its Kroll loan-to-value ratio was 96.4%, compared to an average of 100.6% among the 19 conduits KBRA rated over the preceding six months. Furthermore, according to KBRA, “The pool’s exposure to loans with KLTVs in excess of 100% (23 loans, 51.5%) is also lower than the average for the comparable set (62.1%), which ranged from 35.4% to 73.8%.”