Wells Fargo priced $875.2 million of commercial mortgage backed securities in what has otherwise been a very quiet two weeks for conduit activity.
The lone deal, however, should soon be joined by others, with Bank of America Merrill Lynch analysts predicting a pick-up in activity in what's left of April.
The deal, called WFCM 2015-NXS1, is backed by a portfolio of loans secured by 47 single tenanted properties. The super senior, triple-A, 10-year notes pay swaps plus 85 basis points. DBRS, Fitch Ratings and Moody’s Investors Service rated the senior notes.
Citigroup’s Commercial Mortgage Trust 2015-GC29, the last conduit deal to come out, featured a 10-year super senior tranche that priced at swaps plus 89 basis points.
At the junior level the WFCM deal’s BBB-minus, 10-year, class-D notes priced at swaps plus 320 basis points, or 35 basis points tighter than where Citi priced its similarly rated bond. Moody’s did not rate the junior tranches in either transaction.
The largest loan in the Wells Fargo pool is a $95 million loan underwritten by Natixis that is secured by the Patriots Park Property, a 705,905 square feet of office space and 17,762 square feet of warehouse located in in Reston, VA. A $50 million Wells Fargo, 10-year loan secured by a 16 building office campus located in San Diego called Eastage One, is the second largest loan in the pool.
Two hotel properties secure two of the top ten loans in the pool. The loans, which total $56 million, are underwritten by Natixis and are secured by The Best Western Premier Herald Square and Hotel Valencia, located in downtown San Antonio, Texas.
New issue activity is expected to bounce back in the next ten days with about $12 billion of private label CMBS slated to price this month, according to a Bank of America Merrill Lynch report. Private label CMBS issuance, by the end of April, is expected to total $39 billion, 56% above last year’s Jan-April volume, stated analysts in the report.
Analysts are confident spreads will hold in spite of increased issuance, relative to 2014 volumes, because of the combination of low yields across the globe, strengthening commercial real estate fundamentals in the U.S. and still-favorable supply/demand technicals in the CMBS market.
“Despite the year-over-year decrease in the U.S. unemployment rate, the strengthening dollar (among other factors) may make it difficult for the Fed to begin to raise interest rates as quickly as many investors anticipate,” stated the analysts. “The upshot of this is that it should continue the risk-on, search-for-yield theme among U.S. securities that has been in place for the past few years."