U.S. mall owner Developers Diversified Realty Corp. (DDR) kicked off new CMBS issuance by selling $400 million of securities on Monday under the Federal Reserve’s Term Asset Backed Loan Facility (TALF), which is the first offering under the new-issue CMBS TALF.

Market analysts believe it’s the first step toward restarting the non-government sponsored CMBS market, which has been closed since June 2008, and brings with it some much-needed capital to the commercial real estate universe.

The deal was met with strong investor interest, according to market reports. The positive response allowed DDR to reduce pricing spread from as much as 175 basis points. Its $323 million triple-A rated, five-year notes came in at a narrower 1.4 percentage point premium to the five-year interest rate swap benchmark, or a yield of 3.807 percent, market sources said.

Underwriter Goldman Sachs lowered yield premiums — from earlier guidance levels of 1.6 to 1.75 percentage points — also as a result of the strong buyer interest.

The offering also included two smaller non-TALF-eligible 'AA' and 'A' issues, which priced with 5.75 percent and 6.25 percent yields, respectively. These also drew strong support.

According to Moody's Investors Service, this first new-issue CMBS completed under TALF is a step forward on what may be a long journey toward that market's recovery, as reported by National Mortgage News online.

Although the deal came to market this week, as reported above, Moody's noted in a new report that, "significant issues affecting the broader CMBS securitization sector remain unresolved."

The rating agency added, "not all CMBS loan financings will benefit from the program, which has stringent rules."

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