CMBS issuance is set to resume as industry players returned to their desks following last week's annual industry shindig hosted by the Commercial Real Estate Finance Council (CREFC) in Miami, Florida.
The conference made for a quiet start to 2015 but that’s all set to change. Morgan Stanley/ Bank of America Merrill Lynch are reportedly scheduling a conduit roadshow beginning this week, according to an S&P report.
BofAML securitization analysts said in a report published Monday that as much as $23 billion of CMBS could hit the market over January and February, with half of that volume done via conduits and half done via single-borrower and multi-borrower floating rate deals. However that volume is little more than half of the issuance volume seen over the same time period in 2014, according to Barclays chart below.
A 2015 Outlook Survey conducted by the CREFC forecasts that CMBS issuance this year will increase by approximately 25%, with 70% of survey respondents expecting total issuance to range between $100 billion and $125 billion (the survey polled 77 industry companies).
This level of supply is sure to push spreads on new issues wider. It could also cause the credit curve between the highest rated classes (their coupons are relatively lower) and mezzanine bonds to steepen, relative to where deals priced at the end of last year,according to BofAML “Not only may yield sensitive real money investors require more spread at the top of the capital structure but fast-money investors may also look to receive more spread at the BBB-minus level, partially as a result of limited real-money demand,” the report states.
The last deal to price in 2014 was the Credit Suisse, JP Morgan and Barclays JPMBB 2014-C26. Its benchmark super senior, 10-year AAA' notes sold at a spread of 95 basis points over swaps, eight basis points wide of price guidance.