CMBS Deep Dive: New Issue Underwriting Loan Metrics
In July, CRED iQ’s research team focused upon the underwriting of the latest market transactions. We wanted to understand the key loan metrics across this transaction universe to get a real-time sense of the new issuance marketplace.
CRED iQ analyzed underwriting metrics for the three most recent commercial mortgage-backed securities conduit transactions. We reviewed 158 properties associated with 101 new loans totaling $2.4 billion in loan originations.
All of the loans were originated within the past four months. Our analysis examined interest rates, loan-to-values (LTV), debt service coverage ratios (DSCR), 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.
We found the average interest rate across all loans and property types was 6.9 percent, the average LTV was 59.2 percent, implied cap rates averaged 6.4 percent, and debt yields averaged 11.7 percent.
Office
In total, 16 properties out of the 158 total in our analysis were secured by office assets, comprising a total loan balance of $500 million. Interest rates on these properties’ loans averaged 7.3 percent, implied cap rates averaged 7.02 percent, and debt yields and LTVs averaged 12.1 percent and 59.2 percent, respectively.
Multifamily
There were 51 properties secured by multifamily properties in our analysis, totaling $980 million in new loan originations. Interest rates averaged 6.7 percent on these properties, while cap rates averaged 6 percent for the multifamily sector. Average debt yields were 10.4 percent and LTVs averaged 62.5 percent, which was the highest for each of the sectors.
Retail
The retail component represented a total of $345 million in loan balance across 18 properties. Interest rates averaged 6.87 percent for this sector, cap rates averaged 6.16 percent and the average debt yield was 12.3 percent. Average retail LTVs were 57.3 percent.
Other Notable Findings
Of all the property types included in our analysis, hotels had the highest average interest rate at 7.57 percent. Hotels also had the highest cap rate (7.24 percent) and debt yield (12.7 percent) across the sectors.
Self-storage and manufactured housing properties had the smallest representation in our analysis, with only three self-storage properties and 12 manufactured housing properties in new CMBS issuance, representing balances of $27 million and $70 million, respectively.
Mike Haas is founder and CEO of CRED iQ
