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November 22, 2019  

Bond Buyers Pile Up Their Plates With CMBS

Investors feasted on a pre-Thanksgiving bounty of commercial MBS this week, as dealers served up more than $6.5 billion of conduit and single-borrower transactions plus a couple of CLOs.

Wells Fargo, Bank of America and Morgan Stanley priced a $1.3 billion pooled offering yesterday, with the long-term super-seniors achieving a spread of 92 bp over swaps (BANK 2019-BNK23). That was on the low end of early “whisper” talk and tighter than the week’s other deals (see Initial Pricings on Pages 11-18).

On Tuesday, the comparable class of a $1.2 billion offering from Goldman Sachs, Deutsche Bank and Citigroup went out the door at 94 bp (COMM 2019-GC44). The next day, Credit Suisse, UBS, Rialto Capital, CIBC and Societe Generale priced a $689 million offering (CSAIL 2019-C18), with the benchmark bonds pricing at a 100-bp spread.

Also in the market was an $846.6 million offering from Citi, J.P. Morgan and Deutsche Bank (BMARK 2019-B15), expected to price in the coming days. The benchmark bonds were being whispered at 94-95 bp.

Amid the heavy volume, investors were being choosy about the offerings and following typical tiering patterns. Transactions led by major dealers that contribute all the collateral themselves tend to price at relatively tight levels, due to a perception among investors that the bonds will be supported better in the secondary market. Overall, benchmark spreads have held to a range of 92-102 bp since Labor Day, as a massive wave of deals has worked its way through the system.

“The syndicate desks are cannibalizing each other trying to get all the deals done, but they are pricing in the expected ranges,” said one investor. Pointing to the spread on the BANK deal, he added: “Clearly some people were waiting for the top-tier deal to come out.”

That was also evident down the capital stack, with the triple-B-minus tranche of the BANK deal pricing at 330 bp, while the spreads were 350 bp on the COMM offering and 360 bp for the CSAIL transaction.

Investors said demand remained surprisingly high considering that as yearend approaches, the insurers that make up much of the senior-note buying pool sometimes exhaust their allocations.

Since Labor Day, issuers have pushed out a tremendous volume of paper. Including those currently marketing, there have been 43 CMBS transactions (including 20 conduits and 21 single-borrower deals) totaling $34.6 billion, plus eight CLOs totaling $6.1 billion.

October set a post-crash monthly record for CMBS issuance of $12.4 billion — already eclipsed by this month’s $13.7 billion. The year-to-date total of $83.9 billion exceeds last year’s volume and puts the market on pace for its busiest year since 2015.

Four single-borrower offerings, totaling $2.5 billion, were in the market this week. The largest was a $975 million offering from Goldman, J.P. Morgan and Morgan Stanley. It was backed by the senior portion of a $1.2 billion fixed-rate debt package the banks originated for Jeffrey Soffer on the Fontainebleu Miami Beach hotel. One of the deals priced on Monday: a $350 million securitization of a loan Barclays wrote for Shorenstein Properties on a Manhattan office building.

In the CLO market, Prime Finance priced its sixth offering, weighing in at $760.1 million (PFP 2019-6). Morgan Stanley, Citi and Wells were the bookrunners. The static deal’s senior notes priced at 105 bp over one-month Libor. Also in the market this week was a $670 million offering from MF1 REIT, a joint venture between Berkshire Residential and Limekiln Real Estate. J.P. Morgan structured the deal and ran the books with Credit Suisse.