Lenders and investors have been left high-and-dry with CMBS 3.0, the latest cycle of commercial mortgage-backed securities transactions arranged since August, as tightening credit narrows the pipeline for investments, GlobeSt.com reported.

“We had a lot of fast money buying these securities, and when they saw a better opportunity, they took it,” said Joseph Franzetti, senior vice president at Berkadia Commercial Mortgage, comparing the situation to the fickle world of romance. “And like a person who found a better date, they left you standing by yourself.”

Christopher Reilly, managing director at UBS Securities, attributed much of the reduction in purchasing to the uncertainty in the stock market caused by the Standard & Poor’s downgrade of the US credit rating and the removal of $1.5 billion in CMBS from the market due to a change in criteria this summer. [more]

More than 70 percent of 280 surveyed real estate CEOs, COOs and CFOs said they have a negative, or “bearish,” outlook for the commercial real estate sector over the next 12 months. The poll, cited by Reuters, was conducted by global law firm DLA Piper in connection with its Global Real Estate Summit held today in Chicago.

A lack of confidence in the Obama administration, the general gridlock in Washington and poor job growth were reasons behind the pessimism. Though sales have increased this year, and prices are up 12.5 percent from their lows in April, investors worry that the market will lose more footing. [more]

Illustration by David ColeJuly 27 was a dark day for commercial mortgage-backed securities, or CMBS.
On that day, Goldman Sachs and Citigroup were set to begin selling a $1.5 billion batch of CMBS, secured in part by some New York City properties.
But at the last minute, Standard & Poor’s essentially put the kibosh on the deal. The rating agency said it had discovered a “glitch” in its methodology and would need more time to vouch for the worth of the mortgages at the heart of the bonds. Without the blessing of S & P, the deal died. And with that, the CMBS market — in which pools of real estate loans are bundled together and sold to investors — hit a major snag few had anticipated when the year began.
S & P’s move — along with wild stock market fluctuations, concerns about the debt crisis in Europe and the renewed round of economic problems — helped knock the wind out of the sails of the CMBS market and confirmed the industry’s worst fears of a slowdown. Many expected the CMBS market to quadruple in value from $13 billion in 2010 to $50 billion by the end of 2011, as investors started to regain faith in the strength of the commercial real estate market. Instead, they now expect CMBS issuances to be just $30 billion this year, which calls into question reports of the market’s recovery. [more]

Since January 2010, the losses from loans that had been part of a commercial mortgage-backed security package, but were then liquidated, have been staggering. The chart above from loan data specialists Trepp shows the bulk of the losses come from the peak lending years of the boom, from 2005 to 2007. The bars show the total value of the loans that were liquidated over the past 19 months, split into the portion of the principal that was recovered (in green) and the portion that was lost (in orange). – Adam Pincus [more]

A $1.5 billion commercial mortgage bond sale between Goldman Sachs and Citigroup has been scrapped, the companies said, because Standard & Poor’s would not rate the notes. According to Bloomberg News, the deal had been slated to close today but was delayed because S&P is reviewing its criteria for rating commercial mortgage-backed securities.

“Ratings are a condition precedent to closing and settlement,” Goldman Sachs and Citigroup said in the statement to Business Wire. “Standard & Poor’s had previously informed Goldman and Citi that they were prepared to rate” the transaction, they said.

The risk assessor explained the change in a separate statement.

S&P ’’is reviewing the application of our conduit/fusion CMBS criteria in relation to the calculation of debt service coverage ratios,” it said yesterday. [more]

Carlton’s Howard Michaels

Howard Michaels‘ Carlton Group has reached the number one spot among New York City office investment sales brokerages for the first time thanks to demand for recapitalizations, the New York Post reported.

Carlton ranked number six nationally for the first half of the year based on $1.1 billion in total volume of debt and equity financings. Eastdil Secured came in at number one with over $4 billion.

Carlton’s New York figures are due to three local recaps valued at $1.1 billion — at 1 Park Avenue, 1180 Sixth Avenue and 450 West 33rd Street, according to the Post.

“Typically, recaps haven’t been recognized as investment sales, but they’re the exact same art,” Michaels said. With $850 billion in commercial mortgages due to mature by the end of the year, according to CoStar Group, Michaels anticipates even more demand for recaps, “due to the widening out of spreads in the CMBS market, which is lowering loan levels, and the sluggish economy.” [more]

The following chart from commercial real estate analytics firm Trepp shows the delinquency rates for New York City commercial mortgage-backed securities. The chart represents delinquencies overall and by property type between January 2008 and April 2011, both including and excluding the $3 billion loan for Stuyvesant Town and Peter Cooper Village. TRD

Click to enlarge (source: Trepp)

[more]

Crexus Investment Group said yesterday evening that it rejected an unsolicited $254 million acquisition offer by Starwood Property Trust. In the late afternoon yesterday, Starwood made the $14-a-share-offer to acquire Crexus, a Manhattan-based real estate investment trust. The Starwood offer was contingent on Crexus suspending its previously announced offer to buy $586 million in real estate assets from Barclays Capital Real Estate Finance. Crexus planned to launch an initial public offering of $50 million shares of common stock, which would be used to finance the acquisition of the Barclays assets. [more]

LNR Property is angling to invest in a $600 million pool of Cantor Fitzgerald commercial property loans in what would be its first debt purchase since the revival of the commercial mortgage-backed securities market that began last year, sources told Bloomberg News. Florida-based LNR would purchase the most junior portion of the pool, known as the b-piece, which is riskier but with higher yields. Cantor Fitzgerald said in a regulatory filing this week that it may issue up to $1 billion in commercial-mortgage bonds as it builds up its new real estate practice, Cantor Commercial Real Estate. [Bloomberg]

From left: 478 Third Avenue in Manhattan (source: PropertyShark) and 10 Metrotech Center in Brooklyn

The volume of delinquent commercial mortgage-backed securities in the U.S. rose to a staggering $61.4 billion last month, pegging the delinquency rate at a record-high 9.34 percent, according to a new report from real estate analytics firm Trepp. “While the rate continues to head higher, optimists can point to the fact that the rate of increase is significantly smaller than it was in the prior two months,” said Manus Clancy, managing director at Trepp. “Pessimists can counter that the jump comes despite the fact that new issues continue to make their way into the calculation and servicers continue to resolve troubled loans.”
After all but disappearing in the aftermath of the real estate crash, the CMBS market has already begun to rebound, with, by Trepp’s count, $12.7 billion in issues in 2010. Moody’s Investors Service recently projected that figure would rise to $37 billion this year. The Real Deal chronicled the reincarnation of the nation’s CMBS market in the January print magazine.

But in New York City, those fresh CMBS issues don’t appear to have made a dent in the delinquency rate yet. [more]