By Kevan McCormack

In the three years between 2005-2007, the U.S. originated almost $600 billion (71% of the global total) of new CMBS issuance ($845 billion globally), making this most active 3-year period in CMBS history.  In 2007 alone, the U.S. originated $228.5 billion of CMBS.  Many are worrying that the sheer volume of 2017 maturities (mainly from the 2007 vintage), combined with other factors (e.g. concerning retail sales), will lead to a negative impact on delinquency rates for those existing 2007 CMBS bonds.

By comparison, there was approximately $465 billion of new CMBS issuance between 2008 and 2016 (out of $495 billion globally).  During this 9-year period, U.S. CMBS originations accounted for almost 94% of all CMBS issuances but also reflected a 74% decrease in global CMBS issuance volume and an 88% decrease in Non-U.S. originated CMBS bonds.  In 2016, U.S. CMBS volume was approximately $76 billion.

Summary of CMBS Issuance

U.S. Non-U.S. Global Agency CDO
First Quarter ($Mil.) ($Mil.) ($Mil.) ($Mil.) ($Mil.)
2008 5,904.5 3,785.5 9,690.0 1,223.7 108.4
2009 0.0 1,321.7 1,321.7 1,621.9 0.0
2010 286.7 552.4 839.1 7,504.8 1,691.5
2011 8,706.0 1,311.1 10,017.1 9,218.0 345.6
2012 5,959.1 2,644.6 8,603.6 11,312.3 543.9
2013 22,860.0 2,482.6 25,342.6 15,042.7 813.0
2014 20,369.3 545.5 20,914.8 11,684.0 879.1
2015 27,013.1 1,007.3 28,020.4 12,932.8 1,499.7
2016 19,286.5 352.0 19,638.5 16,127.0 102.6
2017 15,224.1 359.1 15,583.2 16,887.5 1,541.6

Over the last 12 months CMBS delinquency rates have gone up 129 bps. The “Amazon Effect” has meant that many retail deals from the 2007 issuances are less welcome with their limited dollar volume availability. To further stress the supply side, new risk-retention rules were put in place; these force issuers’ shops to hold a 5% piece of all bonds they sell on their books for the life of the loan.  While larger shops can absorb this extra risk and transaction cost, many smaller players have been forced out of the business.

The confluence of these events has led to banks and private / balance sheet lenders to pick up slack in the capital markets. This has filled a much-needed supply void for deals that have not found a new home in the CMBS markets, due to either project related issues (e.g. high vacancy; lease rolls) or macro concerns hitting asset classes (e.g. Anchored Retail centers).  While for banks, recourse is typically required criteria, private balance sheet lenders will swap rate for a lesser guarantee or a non-recourse loan. Therefore, with the right financing partners and advisors leading the charge, most deals can find a new home.

When refinancing your next real estate deal, it is helpful to have a finance partner who is well-versed and educated in all aspects of commercial real estate finance.  MCA has financed over $13 billion of commercial real estate during the past 25 years and is always ready to navigate the waters of constant change in the capital markets.  To discuss the financing of your next real estate project, contact Kevan McCormack at