Bloomberg News

CMBS Sales to Reach $30 Billion in 2012 on Refi Needs, JPMorgan

October 17, 2011

Oct. 17 (Bloomberg) -- Property owners needing to refinance will fuel issuance of bonds backed by commercial-mortgages to as much as $30 billion in 2012, according to JPMorgan Chase & Co.

Sales of securities tied to shopping mall, skyscraper and hotel loans are projected to be between $25 billion and $30 billion next year, JPMorgan analysts led by Ed Reardon in New York said in an Oct. 14 report. Royal Bank of Scotland Group Plc estimated last week there will be $20 billion to $30 billion of transactions in 2012.

About $36 billion in mortgages packaged as bonds matures next year, said Reardon. Some of those borrowers will turn to Wall Street even as banks pull back from originating new loans and charge higher interest rates after Europe’s fiscal crisis spurred price swings in the $600 billion commercial-mortgage backed securities market.

“There is a certain percentage of maturing loans that need to be refinanced in CMBS,” Reardon said in an e-mail. “The interest rate is not the only feature that drives originations.”

Wall Street has arranged about $25.6 billion in commercial mortgage-backed securities this year, compared with about $11.5 billion in all of 2010, according to data compiled by Bloomberg.

Stockpiles of loans for new deals have shrunk amid volatility that’s increased since July as Europe’s leaders failed to stem the region’s sovereign debt crisis. Bank of America Corp. cut its 2011 issuance forecast to between $25 billion and $30 billion in August after predicting more than $40 billion in new sales.

Sales of the debt plummeted to $3.4 billion in 2009 compared with a record $234 billion in 2007, choking off funding to borrowers with maturing loans, the data show.

Super Duper Spreads

About half of loans coming due next year should be able to refinance with as much as $30 billion in projected sales, RBS analysts Brian Lancaster, Richard Hill and Joseph Ruszkowski in Stamford, Connecticut wrote in their report.

The extra yield investors demand to hold top-ranked commercial-mortgage bonds rather than Treasuries soared to 323 basis points, or 3.23 percentage points, on Oct. 4, the most since February 2010, according to the Barclays Capital CMBS AAA Super Duper Index.

Spreads have narrowed to 3.18 percentage points after widening from 2.26 percentage points at the end of July.

--Editors: Pierre Paulden, John Parry

To contact the reporter on this story: Sarah Mulholland in New York at

To contact the editor responsible for this story: Alan Goldstein at

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