Talk of a European CMBS resurrection was among the many positive points the CMBS industry looked at as the Commercial Real Estate Finance Council kicked off its annual industry conference in Miami on Monday.
Trepp reported that the mood in Miami is so upbeat that some market players believe that 2013 will bring the return of CMBS to Europe. “Contingents from a number of institutions sent European envoys in preparation for a rebound for European CMBS,” the Trepp.
European issuers are likely to be looking to get in on the large investor appetite that has driven pricing in over 2012 and the start of 2013. CREFC President Paul Vanderslice said on a panel on Monday, according to Kroll Bonds Ratings, that spreads have steadily tightened, with triple-A spreads starting the year at 120bps over swaps and ending the year at 70 basis points; and triple-B spreads started the year at 800 basis points and ended at 325 basis points.
Single-asset deals continue to draw strong investor interest. Standard & Poor’s reported that on a panel held Monday, some participants said they expected to see more single-asset deals this year, on the back of conduits' limits on the number of large loans an issuer can include. Kroll said that single borrower deals made up 25% of deal flow in 2012, compared to 2006/2007 when single borrower deals only amounted to 4-5% of the market.
“Demand for these deals is increasing as they allow detailed risk analysis, but some believe current spreads do not compensate for idiosyncratic risk,” reported S&P. “On the conduit front, one investor noted the increased property type diversity of recent deals.”
Trepp also noted talk of shops growing their CMBS teams over the course of 2013; both buy-side and sell-side players said they would be looking to add talent over the next six months.