CMBS market remains steady in post risk-retention era

January was the first complete month since new risk-retention laws for CMBS loans went into effect, and despite earlier concerns, CMBS activity remained steady.

In January, there was a total of $61.8 billion on the New York CMBS market, down 1 percent from $62.4 billion in December, and the delinquency rate fell from .79 percent to .76 percent, according to data from Trepp.

A total of $810 million in newly issued CMBS loans backed by New York properties entered the market in January in three separate deals. Of the three, a $350 million loan for SL Green Realty’s 485 Lexington Avenue was the first single-asset deal to be structured after the new risk-retention laws went into effect, requiring the lender to retain a 5-percent stake in the bond at the outset.

SL Green had secured a total of $450 million in financing from Goldman Sachs for the 32-story property, replacing a previous $450 million mortgage from Wachovia bank.

The largest CMBS issue was a $1.3 billion bond from Citibank and Deutsche Bank, $415 million of which was collateralized by New York properties. The largest loan in the package was a $100 million mortgage on the retail condo at the Kushner Companies-owned office building at 229 West 43rd Street. Other loans in the package included an $88 million loan secured by the Chetrit Group’s 23-story office building at 1384 Broadway, and two loans totaling $125 million on 85 Tenth Avenue, owned by Vornado Realty and Related Companies.

While the new laws had bred some anxiety on the market, the risk retention-compliant deals so far have seen healthy investor appetite, says Sean Barrie, an analyst at Trepp. “It means [lenders] have to eat their own cooking.”

The risk-retention regulations fall under the umbrella of Dodd-Frank, which Trump has vowed to dismantle. However, there’s no guarantee that a repeal of of Dodd-Frank would necessarily extend to the risk-retention laws, leading to continued uncertainty over the future of the CMBS market.