The current “visible” CMBS pipeline suggests that the quarter will be one of the busiest for the market since the financial crisis, analysts at JPMorgan said in research published Friday. Fourth-quarter issuance should easily exceed $20 billion and may eclipse the previous record of more than $22 billion set in the first quarter, the report stated.
JPMorgan Chase is preparing a more than $1 billion deal that is diversified by property type but highly leveraged, while another $1 billion-plus deal from Deutsche Bank and Cantor Fitzgerald is backed almost exclusively by hotels but has relatively low leverage.
JPMorgan Chase Mortgage Securities Trust 2013-C16 is backed by the beneficial interest in a pool of 60 commercial mortgage loans secured by 113 properties. Thirty percent are multifamily properties. This is an unusually large concentration, according to a presale report by Fitch Ratings. The average multifamily concentration in Fitch-rated CMBS issued during the first half of this year was just under 9%.
The two largest loans in the pool are collateralized by multifamily properties located in central business districts of primary markets. The Aire represents almost 12% of the pool and the Veritas multifamily portfolio represents just over 8% of the pool.
Office properties represented the second highest concentration, at almost 30%.
The high concentration of multifamily properties is positive. This property sector is less likely to default than some other property types.
The transaction has higher leverage than other recent Fitch-rated fixed-rate deals. The pool’s loan-to-value ratio is approaching 107%, according to Fitch. This is higher than the 2012 and first-half 2013 averages of more than 97% and almost 100%, respectively. The pool’s LTV drops to 103% if the two largest loans secured by multifamily properties in New York City and San Francisco are excluded.
Fitch Ratings has assigned preliminary AAA ratings to six tranches of certificates that benefit from credit enhancement of 30% and have a final maturity of December 2046.
COMM 2013-FL3 is collateralized by five loans secured by the fee and leasehold interests in 37 properties. Four of the five loans comprise 90.3% of the pool. These are secured by lodging properties. This property sector can have more volatile cash flows than other property types due to their dependence on nightly room rates, according to a presale from Kroll Bond Rating Agency. The fifth property is Beekman Tower. It represents almost 10% of the pool, and a multifamily corporate housing project in New York City’s Manhattan borough secures it.
The average LTV of senior debt on the properties is almost 50%, according to Kroll. The LTV inclusive of junior participations is over 66%. The lower leverage levels reduce the likelihood of default, and provide a buffer against potential losses, Kroll noted.