CMBS: ‘More Questions Than Answers’
[{"id": "cyqmkys", "text": "anyone else here specialize in CMBS? If I can find a public version of Credit Suisse's outlook I will share it. It was 40+ pages of analysis.  \n\nI work in servicing... got squeezed out of originations in the crash, did stints in small loan UW and workout between 2007 and now. ", "replies": [{"id": "cyqn6pz", "text": "Yes. I work for a structured products investor (insurance company). I see what's likely to happen is for another year of issuance around $100B, and then barring an extended, severe recession, CMBS issuance will settle at a long-term \"equilibrium\" of around $60B. That's the ideal scenario - the way its been to date, with issuance spiking and dropping, makes for a volatile market in terms of spreads and liquidity. ", "replies": [{"id": "cyqr5z2", "text": "Where does the $60B come from after the 'tsunami' is over? there isn't a huge pipeline of refi, at least not with CMBS paper, for 2018-2020. Is there enough unsecuritized lending out there to make up the difference? ", "replies": [{"id": "cyr6nd3", "text": "+ 5 year fixed-rate loans from 2013-2015\n+ Floating rate transitional loans originated in 2.0 peak vintages (2015-2017)\n+ Construction coming on-line requiring takeout financing\n+ 10 year loans from the high coupon/cap/LTV era of 2010-2011 (i.e. strong refi/cash-out incentive)\n+ Strong multifamily originations from the GSEs\n+ Stealing market share from balance sheet lenders as foreign money pulls out of core assets, widening yields and bringing back some institutional investors into that game. As a result, secondary/tertiary lending becomes less competitive for CMBS, which is its bread and butter \n\nShould at least be able to get past the $40B mark, I think. Given the 10-year cycling of loans, it'll probably end up something like this:\n\n2016: 100B\n\n2017: 110B\n\n2018: 40B\n\n2019: 50B\n\n2020+: 60B\n\nThis 2020 \"equilibrium\" or \"steady-state\" or whatever you want to call it - I think it is vitally important to the long-term health of the CMBS capital markets that it be achieved. The CMBS market is currently in turmoil...liquidity is drying up, underwriting is becoming reckless, and spreads are too high. If another financial crisis is repeated, CMBS could be permanently scarred, as some investors will have been bitten twice by the same snake. ", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]