The commercial mortgage-backed securities (CMBS) sector is well-positioned for growth in 2022 and beyond, according to experts attending CREFC’s annual conference in Miami this week.
The financing source accounted for around $110 billion of issuance in 2021, which could rise to around $120 billion this year, according to Michael Hurley Jr., managing partner at Cassin & Cassin, who co-chairs the law firm’s CMBS loan sales, acquisitions and balance-sheet lending practices.
Hurley said much of the CMBS volume will consist of single-asset single borrower deals (SASBs) with conduits also very active given that billions of conduit loans are scheduled to mature in 2022— 10 years after being financed —at far higher interest rates.
With the Federal Reserve planning to hike interest rates this year, Hurley said market conditions would lend themselves well to conduit lenders.
Hurley also sees potential growth in the commercial loan obligations (CLO) on the horizon.
“There’s a lot of product that still needs to be transitioned,” Hurley told CO at the conference.
“You’ve got about $50 to $60 billion of CMBS maturing, but probably a third of that is not available for refinance through CMBS execution since the debt yields are less than eight percent.”
Rich Highfield, who joined Greystone from Starwood Mortgage Capital to lead its CMBS lending platform late last year, said one aspect that could aid the securitization market in 2022 is CLOs that originated with floating-rate debt. He said much of these deals were constructed as short-term three to five-year loans that could now be ripe for CMBS financing as properties stabilize.
Highfield noted that 2011 was a quiet year for the market before a number of 10-year loans were issued in 2012, 2013 and 2014, paving the way for a heavy securitization activity.
“We’re at the front end of this sort of wave,” said Highfield of the looming maturing CMBS debt. “There’s a pool of opportunity between the maturing CMBS and the maturing CLOs.”
Andrew Coen can be reached at firstname.lastname@example.org.