Commercial mortgage-backed securities staging comeback

Loan volume nearly doubled from 2012 to 2013

From left: 388-390 Greenwich Street and 10 Columbus Circle
From left: 388-390 Greenwich Street and 10 Columbus Circle

The market for commercial mortgage-backed securities, shunned by investors spooked by huge losses during the 2008 crash, is now on the rebound.

The number of defaults on CMBS has tumbled in recent years, and appealing interest rates are luring investors once again. In 2013, the number of CMBS loans nearly doubled year-over-year to $86 billion, according to Crain’s — nearing a pre-crash high of almost $230 billion. Commercial brokerage Massey Knakal Realty Services told Crain’s that this year year the volume is expected to expand to about $105 billion nationally, despite a slow first quarter.

Amid the optimistic buzz, more issuers are getting back into the game. Credit Suisse, one of the biggest lenders during the pre-crash peak, reopened its CMBS business earlier this year.

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“For large loans, CMBS is hugely advantageous because it’s hard to get one bank or even a group of them to write big mortgages,” Patrick Hanlon, an executive at real estate financing firm Akman Ziff, told Crain’s. “We definitely expect more CMBS volume this year than last.”

Among the big CMBS deals so far this quarter are the roughly $1 billion loan Citigroup is putting toward the purchase of a new world headquarters at 388-390 Greenwich Street in Tribeca and a $675 million CMBS financing for the office component of the Time Warner Center, owned by the Related Companies and Singapore-based sovereign wealth fund GIC, arranged by Deutsche Bank. The two mark the biggest floating-rate CMBS mortgages in several years in New York City. [Crain’s]Julie Strickland