Retail malls are less like to be securitized on a standalone basis this year than they were in 2013, according to research published on Friday by J.P. Morgan.
Because of the increased expense of securitizing single commercial loans, these mid-sized assets are more likely to show up as pari passu loans in conduit deals going forward.
Single asset/single borrower deals have contributed $4 billion the volume of new commercial mortgage bonds year to date; that's down from $11.5 billion in the same period 2013.
Retail mall loans contributed $3 billion, issued over 10 deals, to the record $23.8 billion of single asset, single borrower CMBS for all of 2013. All of these mall securitizations were less than $500 million in size.
So far in 2014, however, no retail mall loans have been securitized via the single asset/single borrower route. Instead, these deals have been mostly backed by office, hotel, and mixed use properties.
The JP Morgan chart below illustrates volumes of single asset/single borrower by loans type.
“Assuming these loans are backed by stabilized assets and the borrowers do not need any optionality, conduit deals could become the more natural outlet for some mid-sized assets relative to last year,” wrote J.P. Morgan analysts in the report.
While issuance of single-asset deals is down on the year, conduit supply is ahead of last year’s pace, with $19.7 billion priced through May 9, up from $18.7 billion over the same period of 2013, according to J.P. Morgan. Contributing to the growth in the conduit space is the increase of smaller, pari passu loans in deals this year. The pari passu structure involves splitting a large loan on a single commercial property into several pieces and placing those pieces in separate transactions.