Debt Metrics Come Into Focus for CMBS Deals

The CRED iQ research team in its focus on reviewing underwriting of the latest market transactions wanted to further understand the key loan metrics across this universe to get a real-time sense of the new issuance marketplace.      

CRED iQ analyzed underwriting metrics for the latest eight CMBS conduit transactions. We reviewed 500 properties associated with 302 new loans totaling $6.4 billion in loan value that all originated within the past four months. Our analysis examined interest rates, loan-to-values (LTVs), debt service coverage ratios (DSCRs), net cash flow, debt yields and cap rates. We further broke down these statistics to show a minimum, maximum and average for each metric and by property type. 

Office

In total, 41 properties (of the 500 total in our analysis) were secured by office assets, comprising a total loan balance of $673.5 million. Average interest rates were 7.5 percent and ranged from 6.9 percent to 8.3 percent. Cap rates ranged from 5.5 percent to 9.3 percent and had an average of 7.1 percent for the office sector. Debt yields and DSCRs averaged 13.3 percent and 1.54 percent, respectively. Office LTVs were 54.2 percent on average. 

Multifamily

By loan value, retail was the most popular asset type with $2.3 billion and 128 properties in total were secured by retail properties. Interest rates ranged from 6.2 percent to 9 percent with an average of 7.2 percent. Cap rates ranged from 4.8 percent to 12.3 percent with an average of 6.7 percent for the retail sector. The average debt yield was 15.2 percent. The average DSCR of 2.06 was the highest of any sector, while the LTV of 45.5 percent was the lowest.  

Other notable findings

Hotels had the highest average interest rate (7.7 percent), cap rate (8.1 percent), and debt yield (17.1 percent) across the sectors. 

Manufactured housing represented the smallest property type with only 12 properties backing $59.9 million. Self-storage properties had the lowest average cap rate at 5.8 percent.  

Mike Haas is the CEO and founder of CRED iQ.