As the commercial real estate securitization market becomes more comfortable with risk-retention requirements, quarterly issuance is soaring.
From the period that started on April 1, 2017, and concluded at mid-year, issuance of commercial mortgage-backed securities came to $21.2 billion.
Volume has more than doubled compared to the activity during the first quarter, when $10.5 billion in CRE loan securitizations were completed.
In the second-quarter 2016, there were roughly $10 billion in CMBS issued.
That is according to
CMBS Issuance Skyrockets in Q2 as Market Continues to Warm Up to Risk Retention from Trepp LLC.
The growth came despite the exit of smaller loan contributers and
greater alternative lending competition.
“The narrative for the first half of 2017 proved to be markedly different than the one that prevailed during the same period a year earlier,” the report stated. “In contrast to the market volatility that characterized early 2016 amidst macroeconomic and regulatory uncertainty, the CMBS industry in 2017 has welcomed a bullish post-election equity rally, tighter bond spreads, a more stable global economic outlook and a fairly accommodative monetary policy that favors the current low interest rate environment.”
According to Trepp, the market has adapted to risk retention rules that went into effect in December 2016 as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and new benchmarks for pricing levels are slowly stabilizing.
Required risk retention for sponsors and third-party investors is either 5 percent of each CMBS class, 5 percent of the riskiest classes or a hybrid structure of both that equals 5 percent.
The report indicated that issuance of CMBS secured by retail properties has fallen as a result of challenges impacting brick-and-mortar businesses. Also down is multifamily issuance due to the dominance of the government-sponsored enterprises in the apartment arena.
