Friday, May 11, 2007

It's a New Dawn, It's a New Day

After the busiest three weeks of my life, I'm trying to get back into the routine of posting here. Oh, how much has changed in the past 17 days...

Forget what you thought you learned about today's CMBS world during the last 18 to 24 months - it's been flipped faster than the EOP portfolio. With the subprime meltdown, ratings agency warnings, and activist CMBS buyers at all levels serving as catalysts, the CMBS market underwent an enormous adjustment seemingly overnight. Banks re-traded loan apps on their some of their most successful and profitable clients, several banks made it be known that they are out of the 10-year interest-only lending business for good, some borrowers unable to obtain financing walked away from hard deposits, and one of the go-to funding sources for large deal financings went POOF -- literally -- overnight.

Some of the biggest news items since the hiatus:

CMBS Spreads Widen from Top to Bottom (IPG/CRE News [$])
From the top classes to the B-Pieces, CMBS spreads widened. Most see it as a result of S&P and Fitch warnings about law underwriting and new ratings standards. Some point to the subprime mortgage fallout for why CMBS buyers are feeling a little jittery. Either way, it's affecting everyone from the borrowers to banks with un-securitized loans still on their books.

Institutional Real Estate Cap Rates Hit Record Lows (IPG/CRE News [$])
Something has to give, but it didn't happen in the first quarter, as cap rates dropped even further across all property types, according to Bank of America. Marketwide, the average cap rate hit 5.61%, which continued a now 9-quarter decline. For those scoring at home, that's a less than a 100-bp spread on today's Ten-Year at 4.652%. Fantastic.

60 Wall Trades for $1.18 Billion (Reuters - FREE!)
Paramount takes the downtown asset that's been on the market since November 2006. Something may have changed since I last looked at the deal, but the net rentable are should still be 1,625,483 sf, meaning the price was $738 psf, considered a bargain in New York these days. My last underwriting pegged the initial year's NOI at about $64.5 million, which hints at a 5.47% cap rate. That could be off though, since I haven't seen the deal in about 6 months. Looks as though DB got their target price... less about $20 million (only a 1.7% haircut).

There's no real articles on the on-going CMBS adjustments and how it's affecting the market (that I've seen), except for the pay publications like Commercial Mortgage Alert, which is proving to be a priceless resource right now.

Hoping to find time to post more regularly....



dscr said...


You get no respect. Is there a single comment on your blog?

I'm surprised you didn't mention anything about the GECMC 07-1 deal. Its a sad day when a guy can't securitize 200% LTV, .001 DSCR loans into CMBS anymore...sigh.

Three Capper said...

You're the second. Can you believe that shit?!? Lots of people read the blog (including even people from my company who don't know its me), and lots of people are return visitors, which I hope means they like it... I guess that's enough.