For people searching the horizon for signs of normalcy returning to the real estate capital markets, this summer was an interesting period. Yes, the economy threw off disconcerting
signs of a slowing recovery with its stalling employment figures. But that same period also delivered sizable CMBS issuances to the market: JPMorgan Chase’s sale of a $716.3-million bond backed by commercial mortgages and Goldman Sachs and Citigroup’s securitization of $788.5 million. JPMorgan has also been prepping for another deal, close to $1 billion, which will be the largest such transaction in two years.
But while these transactions augur well for the real estate capital market, they do not necessarily provide guidance as to what it will exactly look like.
That is because the two deals have key differences in their structure. The Goldman Sachs transaction has granted primary authority over the troubled loans to the senior-level debt holders in the deal—a complete reversal from traditional CMBS—whereas JPMorgan is staying true to form. In both deals it granted, or will grant, the buyer of the riskiest piece its usual role.
So, as we approach the one-year anniversary of the first post-crisis CMBS—Developers Diversified’s $400-million issuance last November—what conclusion can observers draw about the health of the commercial real estate market, at least based on these two deals?
Unfortunately, for those seeking some future certainty at least, that story is still unfolding. “It is going to be wait-and-see before the market settles on a dominant structure,” says Jan Sternin, global managing director of business development for Situs Cos. in New York City. “Either one of these could be a model for future CMBS, or there could be a new model when a new deal originates.”
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