Kroll Bond Rating Agency (KBRA) releases Octobers CMBS Trend Watch.
CMBS private-label pricing volume experienced an uptick to $6.9 billion in October, a 48.4% increase from last month. The increased volume brought the year-to-date figure to $65.1 billion in October, which is down 5.5% on a year-over-year basis.
There seems to be a rush of issuance through year end. We may see more than a dozen and one-half single borrowers, as well as the number of conduits in the double digits. In addition, as many as five CRE CLOs may launch through year end.
During October, KBRA published a CRE CLO Trends Spotlight article that summarized some of the trends in CRE CLO securitizations that weve rated since the beginning of last year. Also, released was our CMBS Default and Loss Study, Defaults and Losses Fall to Multi-Year Lows. Among this years observations was that defaults fell to levels not seen in 20 years. The report also included a section on single borrower performance given the sectors increasing prevalence this year, as it has represented 50.7% of CMBS pricing volume. The loans have performed well and exhibited low defaults.
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As an extension of the Default Study, in this months Spotlight section, we provide a more detailed and closer examination of loans that defaulted at maturity. Our analysis segregated these loans into performing maturities (PM) and non-performing maturities (NPM). NPM loans had less favorable credit metrics at origination than PM loans, with higher leverage and lower debt service coverage. NPM loans also had meaningfully higher loss severities of 41.5% compared to 25.1% for PMs.
Of the NPM loans, lodging had the best financial characteristics of the major property types with an origination LTV of 66.8% and DSC of 1.56x. However, it had the second highest loss severity and resolution period of 41.4% and 16.7 months. Of the lodging NPMs, the two chains with the most NPMs were in the Upper Midscale segment. The two Upper Midscale chains included Holiday Inn, and Hampton Inn.
On the ratings front, KBRA published pre-sales for seven deals ($5.1 billion), including two Freddie K-Series ($2.4 billion), two CRE CLOs ($1.1 billion), one SFR ($960.3 million), one re-remic ($429.6 million) and one small balance commercial ($324.2 million). KBRA also assigned an issuer rating to Newmark Group Inc., a diversified commercial real estate services company, as well as its senior unsecured note offering. Surveillance activity included a review of 347 rated classes, including 326 affirmations, 17 upgrades and four downgrades.
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KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus, is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.