Written by Al Yoon The Wall Street Journal October 18, 2012
Some commercial mortgage-backed securities lenders, borrowers and issuers on Thursday predicted the largest jump in issuance in six years for 2013 as low rates and bond risk premiums encourage more borrowing.
Representatives from Blackstone Group LP BX +0.07%, LNR Property and Morgan Stanley sa MS -0.35%id CMBS volume could climb more than 40% from this year, to as much as $65 billion, as they outlined the market’s progress at the Talmage 2012 Credit Conference in New York.
Issuance of privately issued CMBS in 2012 is expected to top out near $46 billion, compared with $33 billion in 2011, according to Commercial Mortgage Alert.
“The pipeline is very strong,” said James Flaum, a managing director at Morgan Stanley.
Stability in the market this year, relative to a rocky 2011, has comforted lenders whose profits rest on their ability to securitize the loans they make quickly, and at prices near or higher than the time of origination. CMBS priced in the past month have sold at or near the tightest yield spread premiums since 2007, suggesting demand has persisted despite a recent surge of supply.
In addition to the boost from lower rates, firms can quote loans at rates low enough to compete with insurance companies that had been undercutting Wall Street banks for some of the best quality real-estate loans, Mr. Flaum said. Those rates are around 3.5% to 4%, he said.
For all the growth, the speakers agreed it would be a long time before the volume could match the record $230 billion of 2007, or if that could ever happen at all. At its peak, CMBS funded 40% of commercial real estate debt.
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Matthew Shirley joined Saurage Rotenberg Commercial Real Estate in January 2011. Matthew is a graduate of Louisiana State University with a degree in International Trade and Finance. While at LSU Matthew was a member of Omicron Delta Epsilon The International Honor Society for Economics. Matthew’s professional memberships include the Greater Baton Rouge Association of REALTORS® Commercial Investment Division and the Louisiana Commercial Data Base (LACDB).
Saurage Rotenberg Commercial Real Estate is a member of the Baton Rouge Area Chamber of Commerce (BRAC); the West Baton Rouge Chamber of Commerce; the Baton Rouge Growth Coalition; the Baton Rouge Better Business Bureau; the Louisiana Commercial Data Base (LACDB); and the International Council of Shopping Centers (ICSC). Several agents, on an individual basis, are members of the Society of Industrial and Office Realtors® (SIOR), the Certified Commercial Investment Member Institute (CCIM); the National Association of REALTORS® (NAR); and the Greater Baton Rouge Association of REALTORS® Commercial Investment Division (CID).