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Mixed Outlook for CMBS in 2017

NEW YORK CITY—Moody’s Investors Service, Morningstar Credit Ratings and Fitch Ratings all see highlights and lowlights among maturing and newly issued CMBS deals in the coming year.

4 World Trade Center Morningstar Credit Ratings’ headquarters at 4 World Trade Center. (Photo: Joe Woolhead)

NEW YORK CITY—Ratings agencies are giving the CMBS outlook a mixed report card, with Moody’s Investors Service saying Monday that property-level fundamentals will continue recovering unevenly across property sectors and metropolitan areas. At Morningstar Credit Ratings, the forecast calls for a payoff rate between 50% and 60% in 2017 as heavily leveraged legacy CMBS loans face difficulties refinancing.

Given lower CMBS issuance, tighter underwriting standards and the uncertainty around risk-retention rules taking effect on Wednesday also may hamper refinancing borderline 2007 loans into CMBS deals, Morningstar said Monday. The ratings agency added that selection bias will further stress the repayment rate, as many stronger-performing loans to mature next year have paid off already.

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Paul Bubny

Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.

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