the year˙end - trepp year end 2019.pdfboston 2.0 orange county, calif. 1.9 top coworking markets...

YEAR-ENDTHE

2019

CRE DISRUPTERSFINDING THE NEXT BIG THING

-2-www.crenews.com Year-End 2019

Despite Being a Small Part of Office Market, Coworking is Key to F illing Space

Coworking space accounts for only 1.7 percent of the 5.5 billion square feet of off ice space in the country's 50 largest markets.

But off ice owners see it as a key space management tool. Page 4.

CRE Not Done Growing (Quite) Yet

It's been said that 2020 would usher in upward pressure on capitalization rates and downward pressure on property values. However, that does not appear to be the case. Page 6.

The Next Big Thing in Real Estate: Blockchain?

The likely benef its of the commercial real estate industry adopting blockchain—a decentralized, irrefutable ledger— would be cost reduction and time savings, as well as cleaner

and more standardized data. Page 7.

The Good, the Bad and the Ugly: 2019

A recap of last year's highs and lows in the commercial real estate and CMBS markets. Page 10.

Hotel Industr y Looks to Emulate Airbnb Model

The home-sharing company thrived last decade, blurring the lines between hotels and Airbnb. Page 11.

Low Interest Rates Drive Surge in CMBS Defeasance Activity

The volume of loans defeased, or replaced by government securities, through last November totaled $12.79 billion. That's up 46 percent f rom $9.7 billion in 2018. Page 14.

Crowdfunding Starts Gaining Ground in Commercial Real Estate

Initially, crowdfunding, the process of raising capital via the Internet, was used to raise preferred equity and debt.

Now, platforms are broadening their offerings to include other pieces of a property's capital stack. Page 16.

CMBS Conduit Loans Maturing Through 2021 Face Few Refinancing Hurdles

A total of $109.6 billion of CMBS loans are up for ref inancing over the next two years. Calm waters are forecast, even if interest rates climb. Page 18.

Shifting from Post-Crisis Regulation to Fresh Policy Challenges in 2020

This year's policy slate will shift f rom the Dodd-Frank policymaking cycle to some major headline issues, including the

Libor transition, reform of the government-sponsored enterprises and relief for lenders complying with the anti-money laundering

Benef icial Ownership requirements. 2.

2019 CMBS Award Winners

The most active players in the CMBS market. Pages 25-35.

The Data Digest

The digest provides insight on CMBS loan defaults, delinquencies and special servicer volumes

in 2019. Page 36.

INSIDE THE YEAR-END

267-247-0112

350 S. Main St. #312P.O. Box 1865

Doylestown, PA 18901

Commercial Real Estate Direct

-3-Year-End 2019 www.crenews.com

LETTER FROM THE EDITOR

Last year, $96.7 billion of domestic, private-label CMBS was issued, topping 2018's issuance by nearly 30 percent. Few had predicted such an active year because most expected interest rates to climb.

The opposite happened.

The 10-year Treasury yield, which briefly topped 3 percent in 2018 and ended the year just below that level, steadily dropped from there, falling to as low as 1.47 percent in 2019. With lender competition healthy, borrowers consistently were able to lock in loans at rates with 4 handles. And because property fundamentals and values have either remained stable or improved, owners were able to refinance loans before their term expirations, often through defeasance. So even though not many loans were coming due, loan origination volumes exploded.

Meanwhile, strong investor demand for CMBS, driven by healthy risk-adjusted returns, allowed issuers to profitably securitize loans.

Those with their fingers on the market's pulse predict this year's issuance to inch up slightly from 2019, as borrowers and lenders continue doing what they've been doing and interest rates remain as low as they've been.

The CMBS issuance story is just one of a number in this issue of the Year-End that looks into what businesses have disrupted the commercial real estate sector. CMBS, started just more than 25 years ago, played a key role, bringing transparency, speed and efficiency to the commercial mortgage lending world, which previously moved at a snail's pace.

Since then, we've seen coworking become a key cog in the national office market, bringing flexibility to both tenants and landlords, and Airbnb, which perennially has threatened the viability of the hotel sector, has actually expanded the universe of potential hotel visitors. Crowdfunding, meanwhile, which became a thing because of legislation passed seven years ago, continues to promise to democratize the entire commercial real estate sector. But it's not quite there yet. It plays a tiny, but growing role in the market.

In this, our sixth Year-End edition, you'll find our CMBS Awards, our league tables. For the first time in what seems like forever, Citigroup took top honors among CMBS bookrunners and loan contributors. It ran the books on 13 percent of the year's issuance and contributed 12 percent of all loans that were securitized through CMBS deals.

I hope you find this edition of the Year-End informative. As always, we look forward to your feedback. Have a happy and prosperous New Year.

Orest Mandzy Managing Editor

Best Regards, Orest Mandzy


By Tim Casey

Coworking companies, those that lease office space under flexible terms, accounted for

57.5 million square feet of the space in the country's 20 largest markets as of September, according to Yardi Matrix.

That would seem like a lot, and is a 42.3 percent increase from the end of last year and 114 percent more than at the end of 2017. But it amounts to only 2.3 percent of the 2.5 billion sf of office space in those markets. When the universe is broadened to the country's top-50 office markets, coworking space accounts for 93.2 million sf, or only 1.7 percent of the 5.5 billion sf in those markets.

So, while coworking has been grabbing headlines of late because of the rapid rise of WeWork and its subsequent fall from grace, it's not the big disrupter to the traditional office leasing sector that many might think. However, coworking has become a key component in helping landlords fill up their buildings and small companies occupy space to which they otherwise might not have access.

Coworking companies usually sign long-term leases for large blocks of space, subdivide it, fit it out and lease it to entrepreneurs and companies under flexible terms. They'll lease space—as little as a cubicle with a desk and Internet connection—for as little as a day. Of course, they charge premiums for that flexibility.

Coworking has been part of the national office landscape since the early 1960s as entrepreneurial companies determined there was demand for office suites and other custom spaces with flexible terms from small professional companies, including law firms. So, it's no surprise that coworking is largely a big-market phenomenon.

The gateway cities of Boston, Chicago, Los Angeles, New York, San Francisco and Washington, D.C., account for 44.1 million sf, or 47 percent, of coworking space, according to Yardi, a Santa Barbara, Calif., research company.

Conventional, direct leases in those markets typically carry terms of 10 to 15 years, making them opportunities for coworking companies.

But coworking accounts for a relatively small percentage of each market's overall office stock. Brooklyn, N.Y., has the highest percentage of coworking space of any of the country's

top markets, amounting to only 3.8 percent, according to Yardi. It accounts for 3.7 percent of Manhattan's office space and 3.5 percent of Miami's space. No other market has a greater than 3 percent concentration of coworking space.

Coworking's expansion in recent years is expected to slow sharply in 2020 as a result of WeWork's pullback. The company, at one point valued at as much as $47 billion, had been leasing up mountains of space in key markets that it then would sublease as coworking space. But its aborted effort to raise public equity in order to continue its leasing activity is expected to have a profound impact on its potential growth.

WeWork has 390 spaces totaling 27.6 million sf, which accounts for 0.5 percent of the office space in the country's top-50 markets. It accounts for 29.6 percent of all space that's classified as coworking. If the company can't be as active as it previously has been, the entire coworking sector will see a slowdown.

But it's not going away."We're a fundamental believer there's a real

business driver (in coworking) today and in the future, and it will grow," said Jeffrey DeVuono, executive vice president and senior managing director at Brandywine Realty Trust, a Philadelphia REIT. DeVuono oversees a 12 million-sf office portfolio in Pennsylvania. "But we were never comfortable with some of the projections that coworking would take over the planet."

About 2 percent of Brandywine's overall office portfolio of 24.6 million sf is leased to coworking firms. DeVuono said that coworking companies

are "great complements to our existing portfolio," but he expects they'll remain a small part for the foreseeable future.

During the early 1960s, a company called OmniOffices Group Inc. subleased small spaces in buildings primarily to business executives or attorneys who used the space either as meeting rooms or offices.

CarrAmerica Realty Corp. had acquired OmniOffices in 1997 and bought HQ Business Centers a year later, forming HQ Global Workplaces Inc. In 2004, Regus Group PLC purchased HQ Global.

Regus' acquisition of HQ Global gave it about 950 locations around the world. But Regus, which was formed in 1989 in Brussels, Belgium, and entered the U.S. market in 1998, ran into financial issues. In 2003, the company's United States arm filed for bankruptcy following the economic downturn that began in late 2000. As the economy soured, Regus saw vacancies climb, pinching its ability to stay current

Continued on next page

Despite Being a Small Part of Office Market, Coworking is Key to Filling Space

Coworking space accounts for only 1.7 percent of the 5.5 billion square feet of office space in the country's 50 largest markets.

But office owners see it as a key space management tool.

Market % Of Office Stock

Brooklyn, N.Y. 3.9

Manhattan 3.7

Miami 3.5

San Francisco 2.6

Los Angeles 2.6

Seattle 2.5

Salt Lake City 2.1

Nashville, Tenn. 2.1

Boston 2.0

Orange County, Calif.

1.9

Top Coworking Markets

Source: Yardi Matrix


on its obligations.Regus, which changed its name to IWG PLC in 2016,

emerged from bankruptcy in 2004 and is now the world's largest coworking company, with more than 50 million sf in 112 countries. It is a major player in the U.S., with about 21.1 million sf in the largest 50 markets, according to Yardi. WeWork, in contrast, has 45 million sf in 29 countries.

But unlike WeWork, IWG is profitable. The company, which is based in Switzerland, generated an operating profit of $66.4 million on $1.7 billion of revenue during the first half of 2019.

IWG, like WeWork, mostly subleases its space to small companies and start-ups, but both have inked deals with large companies, including Facebook, Adidas, Microsoft and IBM.

"When you think about commercial real estate today, flexible working is a known commodity whereas before, we spent a lot of our time educating the customer as to the benefits," said Michael Berretta, IWG's vice president of network development. "Now the customer demand is self-evident."

The investor community agrees, as it has plowed plenty of capital into the sector.

SoftBank Group Corp. of Japan invested billions in WeWork before its failed initial public offering. It invested another $9.5 billion in October, increasing its ownership to 80 percent.

Meanwhile, Convene, which was founded in 2009 and has 30 locations with 1.5 million sf in Boston, Chicago, London, Los Angeles, New York City, Philadelphia and Washington, lined up $280.5 million of equity from investors that included Brookfield Property Partners, RXR Realty and the Durst Organization.

And Knotel Inc. has raised $560 million, valuing the company at more than $1 billion. Its investors include NKF, Norwest Venture Partners of Palo Alto. Calif., and Wafra Inc., the investment arm of Kuwait's sovereign wealth fund. Knotel, founded in 2016, has signed leases for more than 4 million sf in more than 200 buildings.

Industrious, meanwhile, is a slightly different animal. Instead of leasing blocks of space and subleasing it like other coworking companies, it manages coworking space that landlords have set aside. It's raised $222 million of capital from investors that include Brookfield Property, TF Cornerstone and Wells Fargo Strategic Capital. The company, which was formed in 2013, has 90 locations in the U.S.

Industrious earns a management fee for the work it does. Its model is similar to those of Marriott International and Hyatt Hotels Corp., which manage hotels for their owners. Among its clients are Blackstone Group's EQ Office affiliate, for which it operates 140,000 sf at the Hughes Center, a 1.4 million-sf office complex in Los Angeles; as well as Hines, for which it operates coworking space at 717 Texas Ave., a 697,195-sf office complex in Houston, and the Kearns Building, with 166,939 sf at 136 South Main St. in Salt Lake City.

Such agreements are still rare, but they are expected to become more common as coworking companies seek to generate more stable cash flows and landlords look to meet

the demands of tenants that prefer shorter lease terms.Coworking as a third-party service concept is "still in the

initial roll-out of implementation," said Scott Homa, JLL's director of office research. "But we're definitely expecting the lion's share of growth in the future to come in the form of those management agreements."

Some landlords, including Washington REIT, Tishman Speyer and Boston Properties Inc., have set aside space in some of their buildings for coworking. But instead of partnering with companies that specialize in the sector, they manage, design and lease the space themselves.

Boston Properties launched its concept, known as Flex by BXP, two years ago on the 29th floor of the 52-story Prudential Tower in Boston. It also plans on setting aside coworking office space at the Hub on Causeway mixed-use project it is developing in Boston.

Tishman Speyer’s initiative, dubbed Studio, was started in 2018 with 35,000 sf at 600 Fifth Ave., a 371,200-sf office building in Manhattan's Rockefeller Center. It since has expanded the concept to other properties it owns, including 125 High St. in Boston, 900 19th St. in Washington and 407 Maple Plaza in Los Angeles.

WashREIT’s coworking initiative, called Space+, is offered at 14 office buildings, spanning a total of 200,000 sf, or about 5 percent of the company's 4 million-sf office portfolio. The company expects to set aside another 100,000 sf in the program next year to meet tenant demand. The cost to lease coworking space under the program is roughly 8 percent to 10 percent more than through conventional leases. But in return, a tenant gets term flexibility plus a fully furnished office.

"If you look at the building as a whole, part of the ecosystem is that flexible, coworking space," said Rob Walters, a principal at Avison Young. "That's a portion of the tenant demand. Landlords are trying to capture that."

Jeff Shaw, chief executive of Bridge Commercial Real Estate of Atlanta, which owns 103 office buildings with 13 million sf in 14 states, noted that the demand for flexible, coworking space remains strong. So, the company has signed leases for about 2 percent of its space with coworking companies and it's close to completing a deal with a coworking company that will manage space in its buildings.

Shaw noted that Bridge expects to open five to 10 locations in 2020, of between 25,000 sf and 50,000 sf each, that it would lease on a short-term basis.

"There is definitely going to be growth (in coworking)," Shaw said. "It's something landlords need to pay attention to and it needs to be a part of their strategies in the future. It's still fairly cutting edge."

Continued from previous page

Coworking is "something landlords need to pay attention to and it needs to be a part of their strategies in the

future." - Jeff Shaw, chief executive,

Bridge Commercial Real Estate


By Jamie Woodwell

The commercial real estate and finance markets have been on a long-running roll. Since

the end of the Great Financial Crisis, property rents and net operating incomes generally have increased, while capitalization and mortgage rates have declined. Meanwhile, property values, sales transactions, mortgage originations and mortgage debt outstanding generally have increased.

What's not to love?Last year at this time, we were anticipating this long-

running period of growth would be transitioning to a period of "plateau," with rising interest rates putting upward pressure on cap rates and slowing the long-term increase we've seen in property values. We weren't alone. Economists surveyed by the Wall Street Journal, the Federal Reserve Bank of Philadelphia and others largely expected rates to increase from the 3 percent-plus levels of 2018. And surveys of institutional real estate investors anticipated that while property income returns would stay strong, and even grow, appreciation would slow—and in some cases, reverse course.

That was then, this is now.Instead of increasing, interest rates fell further, with the

10-year Treasury dropping to an average of 1.81 percent in November 2019 from 3.12 percent a year earlier. Many measures of cap rates have largely held steady in the months since, but if the average cap rate for apartment buildings (5.5 percent for most of the year, according to Real Capital Analytics) fell by the same 131 basis points that long-term Treasury rates fell, that would imply a 24 percent increase in property values—without accounting for the impact of any parallel increases in property incomes.

So instead of upward pressure on cap rates and downward pressure on property values, we enter 2020 with the potential of downward pressure on cap rates and (further) upward pressure on property values.

What a difference a year makes.In a recent paper, Where from Here? Trends in Commercial/

Multifamily Real Estate Finance Markets, we identified five key issues—including the ones driving the trend described above—that will shape the coming year in commercial real estate and finance.

Jobs

On a seasonally adjusted basis, the United States has added jobs every month since February 2010—bringing a

total of 22 million additional positions during that period. That growth has helped support office and other markets, but has been muted by the ever-more efficient use of space by occupiers, teleworking arrangements and other trends. Employment growth has been slowing over recent years and months, and the tight labor market may constrict that growth further. The outlook for job growth—and the demand it brings to the office, retail, multifamily and other property sectors—remains positive, but it is highly likely the pace of that growth may slow.

Households

Four years ago, the Mortgage Bankers Association published a paper, Housing Demand: Demographics and the Numbers Behind the Coming Multi-Million Increase in Households, which predicted a growth of roughly 1.6 million households per year between 2014 and 2024. U.S. Census Bureau numbers show that in both 2017 and 2018, the country added 1.6 million households, and that between the third quarter of 2018 and third quarter of last year, 1.3 million households were added. Equally important as the overall level of growth is the composition of that growth. After more than 10 years of increases, the population age of 25 to 29 (a key renting demographic) will decline between 2020 and 2025. The population aged 40-44 (a key home-buying demographic) will turn from decline to growth, and the population aged 75-plus will surge. Those changes will affect the aggregate demand for housing, shopping and other uses of space, and equally important, the composition of that demand.

Consumer

The U.S. consumer is the life-blood of the U.S. and world economies. In the third quarter of 2019, personal consumption expenditures accounted for $14.7 trillion, or 68 percent, of the $21.5 trillion U.S. economy. Job, wage and household growth in recent years have all supported that consumption, and retail sales (excluding motor vehicle and parts dealers) increased 2.6 percent between the 12 month period ending November 2019. More of that consumption is going online (11.2 percent as of the third quarter), but U.S. consumers remain an essential element of commercial real estate demand and the economy as a whole.

Consumer debt-service levels are at their lowest since the Fed began tracking them in 1980, so consumers should be in good shape for whatever turns the economy brings, but their continued engagement is essential.

Interest Rates

Interest rates have defied expectations for more than a decade—with economists and investors anticipating that economic growth and tight labor markets would push long-term rates higher. Instead, rates have trended downward.

CRE Not Done Growing (Quite) Yet



By Manus Clancy

Almost two decades ago, the global economy saw the bursting of the dot-com

bubble. The tech-heavy Nasdaq stock index, which hit an all-time high of 5,046 on March 9, 2000, plunged by almost 80 percent over the following 18 months. It wouldn't climb back to its peak until 15 years later.

Investors usually associate that bubble era with online retail disasters. One of the most disastrous was Pets.com. The hysteria around the pet-food supplier allowed it to raise enough money to run a Super Bowl ad in 1999 and sponsor a balloon in the Macy's Thanksgiving Day parade. The company had its initial public offering near the end of that period of e-commerce mania, but it, along with its ubiquitous sock-puppet mascot were gone within two years.

The stories were the same for other e-commerce companies, including eToys, Garden.com and FogDog.

Many of the biggest failures of the era have been recreated in one form or another. Pets.com has been replaced conceptually by Chewy.com. WebVan has been reincarnated in the grocery delivery space by Fresh Direct, Peapod and Amazon.com. In 1999, you could get your football game-

day snacks from Kozmo.com. Today, you'd call Uber Eats or DoorDash. Kozmo also would deliver CDs and VCR tapes—two other items whose time has come and gone.

Commercial real estate had plenty of its own dot.com stories. Those included Commercial Real Estate Online, or comro.com, which marketed and leased properties online; Zethus Inc., an online leasing platform that was backed by Goldman Sachs; property data company RealtyIQ.com; and a host of software providers to the lending sector, including Redbricks.com, MortgageSelector and CapitalThinking.

Perhaps the most talked about of the bunch was The Realm, which was designed as a business-to-business hub for the industry. The company, backed by some $140 million ponied up by blue-chip investors including Hicks, Muse, Tate & Furst Inc., TH Lee Putnam Internet Partners, CMGI Inc. and Gleacher Capital Partners, had planned to launch a number of products, including an online lending platform, a research and information portal and whole-loan and CMBS trading platform. It even had acquired Argus Financial Software and operated it as Realm Business Solutions.

Past is Prologue or Something Else?

That backdrop seems fitting for today as many investors look at the latest generation of disruptors like WeWork, Uber, Airbnb and Grubhub for signs of the next big thing or the next big bust.


The Next Big Thing in Real Estate: Blockchain?

Commercial real estate can be heavily influenced by the direction of rates—with the availability and cost of mortgage financing a key input to investment and development decisions—and with cap rates, which may move in sympathy with base interest rates, affecting the underlying value of commercial properties. The result can be shrinking cap rates (and rising property values) when rates drop and increasing cap rates (and declining property values) when rates rise. New expectations that rates may remain "lower for longer" could be a boon for commercial real estate values, as well as transaction volumes.

Search for Yield

Amid all the trends outlined above, one key characteristic of today's market is the search for yield. Investors have a strong appetite for CRE and CRE finance investments. They've also had a willingness to take on increased risk in the face of low yields. CMBS bond pricing is perhaps the

clearest example of this, with the credit curve for CMBS (a line showing the increased yield investors demand to take on additional risk) falling and flattening—meaning investors are requiring less additional yield to invest in riskier bonds than they had in the past. The two key takeaways should probably be a) investors' comfort with CRE debt as an investment and b) the difficulty investors face in the current broad investment markets in finding higher yielding options.

Conclusion

CRE and finance markets are entering 2020 with momentum and a still strong foundation. As we move from a period of almost exclusively tailwinds to one in which some headwinds will likely begin to be seen, it appears that CRE's 10-year run of growth is not done (quite) yet.

Jamie Woodwell is vice president of commercial real estate research at the Mortgage Bankers Association.



The most intriguing and least understood of the potential disruptors is blockchain. To be sure, blockchain is not a product unto itself. Just as companies use the Internet as the backbone on which to build businesses, companies in dozens of industries are looking to use blockchain as the foundation for new disruptional products.

Blockchain is essentially a decentralized ledger, a cluster of connected computers, in much the same way the Internet is a global computer network. Whereas the Internet connects computers that house different data sets, graphics, commentary and information, blockchain is a collection of computers housing the same data. The blockchain network seeks to maintain an indisputable time-stamped series record of data—an irrefutable ledger, if you will. Only those granted permission by data owners can access it.

Thus far, the only meaningful impact made by the technology has been in the area of cryptocurrency, like Bitcoin and Ethereum. The data for cryptocurrencies is maintained on thousands of computers simultaneously— essentially a spreadsheet that's duplicated and maintained all over the world. That distribution makes it hard to hack or manipulate data, making it a desirable environment for financial recordkeeping.

Can Blockchain Disrupt Commercial Real Estate?

The likely benefits of the commercial real estate industry adopting blockchain would be cost reduction and time savings, as well as cleaner and more standardized data.

Consider the title-insurance business in the residential property space, which accounts for 60,000 workers and in 2018 generated $16 billion, largely from time-consuming lien and encumbrance searches. With blockchain in place, a lien search could be completed nearly instantaneously.

But the barriers to the technology's success are not insubstantial. The disintermediation only works when adoption is widespread. A company that becomes first adopter will likely be sinking unrecoverable funds into such an endeavor if its competitors don't follow suit.

On the flip side, companies that don't participate while most of an industry does, risk being priced out of the market.

In the commercial real estate space, one of the more intriguing possibilities for blockchain could be in the leasing space, which suffers from a general lack of data transparency and uniformity that can lead to time-consuming document-reconciliation. The existing lease writing process can be expensive, leading to meaningful cost and time.

A move to blockchain could drive down the time and costs needed to complete transactions. To be sure, this could be affected simply by the industry adopting more uniform

standards. But if uniformity is desired, doing it through blockchain would make it doubly cost-effective by making it the database of record for all leases and amendments.

The leasing brokerage industry might also have a meaningful secondary incentive for supporting a move to blockchain. Leasing data today are available via costly third-party platforms to which leasing brokers contribute data on their space availabilities. Blockchain could effectively disintermediate those platforms by allowing brokers to contribute and maintain their data—they would keep ownership, which they typically give up when they contribute to third parties—and sell to third parties or use internally as they please.

For insight on how challenging the adoption of blockchain might be, look no further than the Investor Reporting Package, or IRP, adopted by the CMBS industry more than two decades ago.

Adoption was a slog for trustees and servicers, which had to reprogram their systems, and the industry as a whole, which wrote the standards for the package. It continues to be updated regularly, resulting in additional data and transparency. But the benefits have been tremendous.

The transparency and uniformity provided by the IRP have made it easier for CMBS to attract additional participants, particularly investors.

IRP also has allowed for improved deal execution, as investors have grown confident that relevant data are plentiful, which in turn has improved pricing on the secondary market. In addition, borrowers have benefited from lower costs as a result of the better deal execution, which has allowed CMBS to remain a steady and key source of financing for the commercial real estate sector.

The abundance of data and its uniformity also has allowed for the creation of default and risk-prediction models.

The payoff likewise could be huge for the leasing community if it were to adopt blockchain.

Other commercial real estate segments might also benefit from adoption.

Posting CMBS remittance data on blockchain is one possibility; introducing uniform loan documentation would be another, as would the trading of CMBX and other derivative instruments.

Imbrex of New York, earlier this year launched Escrow Commons, a real estate transaction "closing room" that relies on blockchain. Buyers and sellers can exchange documents, process escrow, deposits and transaction funds. It is working with TruSet, also of New York, to standardize property purchase and sales agreements that would allow residential real estate brokers to process transactions more efficiently than they now do.

Figure Technologies Services is another player in the residential space that's making inroads using blockchain. The company, led by its founder, Mike Cagney, has developed Provenance.io to originate, process and fund home equity loans.

History suggests that roll-out and adoption of blockchain broadly will not be unlike e-commerce 1.0, at the close of 2001. In other words, many pioneers won't reap the rewards of their efforts.

As we look back at 2001, for every Amazon success story, there were scores of failures.


... the barriers to (Blockchain)'s success are not insubstantial. The

disintermediation only works when adoption is widespread.


Trepp AcAdemic ediTion

Trepp is partnering with universities and colleges that offer commercial real estate programs to foster mastery of Trepp CMBS data and analytics. Trepp Academic Edition aims to complement and strengthen course syllabi and to make students more competitive in the marketplace.

>> Undergraduate Programs

>> For MBA Graduate Programs

>> Trepp Certified

Trepp reseArch ediTion

Trepp Research Edition aims to strengthen students’ thesis, white papers and research projects by providing access to CMBS data.

>> For Ph.D. Candidates

>> For Faculty

What you need for Where you’re going in cre FinAnce

Trepp universiTy

U n d e r g r a d Uat e s t U d en t s

M B a c a n d i dat es

P h . d . c a n d i dat es

fac U lt y

For more information visit our website or contact Erin Timko at 212-754-1010.

www.trepp.com/solutions/trepp-university


By Manus Clancy

We had given 2018 a solid A grade for the CMBS market. And even though

we graded on a curve, the market had wildly exceeded expectations in terms of issuance volume.

While private-label issuance had dropped by nearly 12 percent from the year before, to $76.1 billion, some early prognostications called for issuance to come in at about $60 billion in 2019.

This year, we've given the market an A+ for 2019, again because it exceeded most expectations.

To be sure, there were plenty of reasons to be concerned heading into the year. The last quarter of 2018 saw a sharp up-tick in volatility, particularly in the leveraged loan market. That volatility led to a spike in spreads across all fixed-income asset classes late in the year and a deep markdown of leveraged loan prices that kept issuers and investors on tenterhooks. Many believed the industry was facing a sequel to the late 2015, early 2016 "movie" that saw fourth-quarter volatility spill into the new year and drag the lending market to a crawl.

The sequel turned out to be much more uplifting, however. Fixed-income spreads stabilized and quickly tightened almost immediately after the New Year's Eve ball drop. The dip in CMBS lending was almost imperceptible compared with 2016, as issuers got right to work.

The rest of 2019 was devoid of any meaningful drama. Yes, the unraveling of WeWork Inc., a new wave of retail bankruptcies and concerns about the student-housing market did make headlines. But none of those stories could slow down the primary CMBS market. Even in the secondary market, spreads remained range-bound throughout the year

as volatility came up about as often as someone predicting the New York Knicks to win the NBA title.

The lack of instability provided issuers with terrific conditions for lending. Issuance grew throughout the year. Adding to the tailwinds were two other factors. First, as the 10-year Treasury rate fell below 2 percent and stayed there, CMBS issuers were able to pick up market share as other lenders balked at the lack of absolute return. And second, as the housing-finance agencies hit their limits on multifamily lending, CMBS lenders were able to pick up the slack.

As a result, CMBS issuance for 2019 came in solidly above the previous year's levels. In addition, it proved to be a huge growth year for the commercial real estate collateralized loan obligation market, making the final issuance numbers the best since the financial crisis.

With that as a prelude, we offer up this year's version of the Good, the Bad and the Ugly.

The Good, the Bad and the Ugly: 2019

• After a rocky end to 2018, fixed income spreads contract as leveraged loan market stabilizes.• Clemson obliterates Alabama, 44-16, for the school's second national title in three years.• Walt Disney acquires 21st Century Fox for $71 billion.• Durst Organization's $583 million Four Times Square (Manhattan) loan gets refinanced, despite loss of entire tenant base.• Dallas office complex behind $152 million loan lands Tenet Health to replace sole tenant JPMorgan.• Alder Hill ends its short position against CMBX 6.• Toys "R" Us makes comeback at two U.S. Malls.• CMBS delinquency rate hits another post-crisis low after falling in 25 of last 29 months.

Good Headlines from 2019

• Midwestern retailer Shopko announces Chapter 11 bankruptcy—six months later, all stores would be shuttered.• Amazon.com backs out of commitment to bring 25,000 jobs to Queens, N.Y., after locals protest.• Borrowers behind $430 million, single-asset Destiny USA Mall (Syracuse, N.Y.) loan announce they will not be able to pay off loan at maturity.• $120 million New York City retail loan heads to special servicing over zoning issue.• Value of collateral behind $80 million Three Westlake Park (Houston) loan cut by 65 percent after BP and Conoco Phillips vacate local office market.• BB&T and SunTrust announce merger to create trust. • Cracks continue to show in student-housing sector as $39.9 million loan against property near University of Alabama heads to special servicing.• Luxury retailer Barneys files for bankruptcy.• Carl Icahn's short of CMBX 6 BBB- revealed.

Bad Headlines from 2019

• $200 million Missouri mall loan resolved with nearly $150 million loss.• $53 million Washington, D.C., office loan resolved with 101 percent loss after occupancy falls to zero and ground-lease payment spikes.• $51 million loan against former Washington Prime property, Towne West Square Mall (Wichita, Kan.), resolved with 65 percent loss; backed 2011 deal.• Wall Street Journal reports WeWork chief executive has cashed out $700 million—news leads to scrutiny of office sharing start-up and pulling of firm’s initial public offering. • Rudin Management pulls 110 Wall St. (Manhattan) from sales block over WeWork concerns.• Bitcoin ATMs announced for U.S. malls.• Retailer A'Gaci liquidates all 54 stores.• Protests Break Out in Hong Kong.

Ugly Headlines from 2019


By James Boyle

Home-sharing company Airbnb Inc., which was founded 11 years ago by

three guys with an extra air mattress in San Francisco, has been actively growing its foothold in the hotel industry.

The company, which is expected to go public this year, counts more than 150 million users globally and more than six million room listings, making it one of the top hospitality providers in the world, rivaling industry giants such as Hilton Worldwide Holdings Inc. and Marriott International.

Airbnb has been making inroads into the hotel market, while the industry has recovered handsomely from the aftermath of the 2008 recession. The industry has been posting record-performance numbers since 2012, with occupancy, average daily rate and revenue per available room increasing every quarter through the fall of 2019. The cycle is finally starting to wind down as supply projections start to outweigh demand. Airbnb is hardly blamed by industry

experts for the forecast. While the company has undoubtedly affected the hotel market, its exact impact can be difficult to pinpoint.

"It's really hard to quantify what Airbnb has done to the industry," said Luigi Major, managing director and partner at the Los Angeles office of brokerage firm HVS. "It's hard to track the numbers and quantify units in the market on an annual basis because the supply can be added or removed at any time by owners.

Meanwhile, he added, "Hotels have to stay open all the time, so it's easier to quantify changes in the hotel space."

Major said that it's clear that Airbnb and lesser known rivals such as Expedia's HomeAway platform have tapped into a previously underserved market. The affordability of a spare room attracts a segment of people who otherwise might skip a vacation because they couldn't find a cheaper place to stay.

"They have opened up the travel industry to demand that was unsatisfied in the past," he said. "It has provided a unique product throughout the world."

In 2007, a tech conference in San Francisco inspired Joe Gebbia and Brian Chesky to rent some space in their apartment to out-of-towners. They offered guests an inflatable mattress and meal—airbed and breakfast, hence

Hotel Industry Looks to Emulate Airbnb ModelThe home-sharing company thrived last decade, blurring the lines between hotels and Airbnb.


The most important news in the market, direct to your inbox.To access Commercial Real Estate Direct online and receive The Weekly, sign up or start a free trial at www.crenews.com or call 212-329-6239.


Airbnb—for $80 a night. They partnered with Nathan Blecharczyk to transform the quick cash grab into a fledgling web platform that launched in 2008. Airbnb got its first seed investment in 2009—$600,000 from Sequoia Capital, and by 2011 it had reached one million nights booked in 89 countries. As the company gained ground, the hotel industry was on the cusp of a major recovery.

The hotel industry was reeling in 2009 from the recession, with overall gross revenue declining $13.4 billion to $127.2 billion, according to STR, a Hendersonville, Tenn., research firm. Occupancy, average daily rates and RevPAR decreased each month, with RevPAR falling 16.7 percent for the entire year, to $53.71, the metric's lowest level since STR began tracking the industry in 1987. Occupancy was down to 55.1 percent from 2007's 63.1 percent and ADR decreased to $97.51 from $104.04 in 2007.

As a result of the industry's weak financial performance, development of new properties ground to a virtual halt, increasing by only 0.6 percent in 2011. A year later, demand started improving. And partly because so few rooms had been added during the years that followed the recession, occupancy climbed to 60.1 percent. ADR and RevPAR increased as well, to $101.64 and $61.06, respectively.

It was the start of a seven-year period of record-breaking

performance for the industry.By 2018, occupancy had reached 66.2 percent and ADR hit

$129.83, taking RevPAR up to $85.96. Developers took note and increased room supply.

"Every year since 2012, (the hotel sector) has sold more rooms than ever, and every year there have been more rooms added than ever," said Jan Freitag, senior vice president of lodging insights at STR. Demand growth has outpaced supply growth and the industry has seen the highest occupancy rate on an annualized basis ever recorded. ADR growth and RevPAR numbers are higher than they've ever been."

Last year, supply growth started to overtake demand. Projections call for supply to grow more than 2 percent this year, with the addition of 129,531 rooms. Next year will see 139,793 room additions, the biggest annual total since 2009. Demand, in contrast, was expected to grow by about 1.8 percent in 2019 and 1.5 percent this year.

Some hotel companies already have started posting weaker operating metrics. But none have blamed Airbnb. Rather, they've pointed to external factors and a decline in demand.

"Airbnb has definitely been a hot topic in hotel circles for the past few years," said Jamie Lane, senior managing economist for CBRE Americas Hotels Research. "It's really hard to point to one number and say it 100 percent had a

specific effect."The palpable effects can be seen more clearly on the local

level, in major markets like New York and San Francisco where Airbnb has a healthy presence. The U.S. averages more than 660,000 listings on the site, while traditional hotels total more than six million rooms. New York is the largest Airbnb city, with more than 50,000 listings, while San Francisco has around 7,800 units.

Airbnb's strength in larger markets has been stymied, however, by stricter regulations on short-term rentals. The company's listings in San Francisco were cut nearly in half in 2018, to 6,000 units, after legislators passed a law requiring hosts to register with the city. New York has cracked down on illegal hotels, where property owners turn apartment units into transient rooms. A state law passed in 2018 prohibits the renting of an apartment unit for fewer than 30 days unless the tenant is present. In turn, Airbnb has agreed to provide more transparency of host data to combat what's now illegal use.

"New York is an example of a place where legislation is not keeping up with the market," said Lawrence Wolfe, vice chair of NKF's lodging and capital markets group. "The cost of a well-located apartment has gone up a lot, and the short-term rental phenomenon has removed residential units from the market. It is impacting affordability for ordinary people, and there has been a negative impact on hotel owners who operate under a different set of rules and regulations than an apartment owner."

Meanwhile, the Airbnb model has become something hotel chains are looking to emulate. A promise of more authentic experiences in cities ripe for tourism like Miami and Los Angeles has hotel owners thinking more creatively, Wolfe said.

"Airbnb has been a phenomenal catalyst for hotel owners to rethink what they are offering," Wolfe said. "Hotels are now branding unique experiences for leisure travelers. Business travelers will always rely on the consistency from a Marriott, where they know exactly what they are going to get. Airbnbs will always be underpriced for the younger generation and vacationers, there's no way to compete with that."

Instead, the major brands are joining the alternative lodging game. Marriott has started a luxury home-sharing service, partnering with property management companies to offer experiences such as staying at a four-bedroom cottage in California's wine country or a six-bedroom townhouse in London.

Hyatt attempted a similar offering through a partnership with Oasis in 2017, but the experiment was abandoned after 14 months. The company continues to manage its soft brand chain of hotels, the Unbound Collection. Launched in 2016, the brand features boutique properties marketed as having more personality with more local authenticity, rather than the familiarity of its contemporary properties.

"There is a demographic craving authentic experiences, and it's not just Millennials," Major said. "Major brands have shifted products to create a unique environment, and there are independent hotels that have embraced its local identity. The lines are blurring more and more between the hotel industry and Airbnb. Hotels are taking notes on what Airbnb offers, and Airbnb is taking notes on how hotels standardize services."


"Airbnb has been a phenomenal catalyst for hotel owners to

rethink what they are offering." - Lawrence Wolfe, Vice Chair of NKF's Lodging

and Capital Markets Group


Leaders in CMBS

Transparent and clear approach

Flexibility to adapt to rapidly-changing market

Real-world experience evaluating transitional collateral

[email protected]+1 800 299-1665

@mstarcrdratings

The next generationof credit ratings

SASB Conduit CRE CLO


By Jyoti Yadav

After a couple of calm years during which CMBS defeasance volumes declined

substantially from their post-recession peaks, 2019 saw significant growth in the activity in large part because of super-low interest rates.

Defeasance activity in the CMBS universe had reached a post-recession peak of $21.2 billion in 2015, which coincidentally was the peak of the so-called "wall of maturities." It dropped to $15.9 billion in 2016 and a mere $6.4 billion a year later, as few loans were in their peak defeasance windows.

In 2018, however, defeasance activity increased by 51 percent, to $9.7 billion. And last year through November, volumes had increased by 46 percent to $12.79 billion. In terms of the number of defeased loans, 2019 had 763 versus 554 the previous year.

Securitized commercial mortgages typically are locked out from early prepayment to ensure lenders receive the cash flows they expected for the loan's term. If a borrower would like to pay off a loan before it becomes open to prepayment, for instance, in the event of a sale or refinancing, they can take the defeasance route.

Defeasance is a process through which a borrower replaces a loan's scheduled payments with a commensurate cash flow from government securities. It could be a costly process, however, particularly if the loan being defeased has a substantial amount of term remaining and prevailing interest rates have declined substantially. That would require a large number of lower paying securities to be purchased to replicate the defeased loan's cash flow.

Nonetheless, property owners will turn to defeasance in order to take advantage of what might be substantially lower mortgage interest rates, or to tap the equity created by an increase in property values. While the latter is typically the key factor in boosting defeasance activity, substantially low interest rates as of late have become the significant driver.

Given current rates, the surge in defeasance activity is no surprise, as borrowers seek to refinance higher-coupon loans with today's lower rates. The average coupon rate for all loans defeased this year was 5.02 percent. That compares with a 4.43 percent average coupon for all securitized conduit loans last year.

What is surprising, however, is that more than 50 percent of the loans defeased in 2019 had more than four years left until maturity—up from 40 percent the previous year. Because the cost to defease a loan increases as the time to maturity increases, borrowers tend to defease closer to maturity. But rates have declined so much, and property values increased enough to justify the higher costs, driving more borrowers to refinance their loans through defeasance.

On an individual state level, New York accounted for the largest share of defeasance volume, with a 25 percent total concentration. It was followed by Washington, with a 14 percent share, and California, at 12 percent. Each state includes a major market—California has at least three—where property prices have seen extremely large value increases since the recession.

Of the 763 loans that were defeased last year, 26 percent were backed by multifamily properties, 18 percent by retail and 15 percent by office. Those three property sectors also have the greatest representation in the overall CMBS universe.

The largest loan defeased in 2019 was the $650 million mortgage against Bank of America Tower, a 2.3 million-square-foot office property at One Bryant Park in Manhattan. That interest-only loan, securitized through One Bryant Park Trust, 2010-OBP, paid a coupon of 4.65 percent, requiring $30.2 million of annual interest payments, and wasn't set to mature until July 2020. Its collateral had generated $122 million of cash flow 10 years ago, and was appraised at a value of $2.2 billion.

The loan was defeased with proceeds of a $950 million loan that was securitized through BAMLL Commercial Mortgage Securities Trust, 2019-OBP. That loan also requires only interest payments. It pays a coupon of 2.594 percent, requiring $24.6 million of annual interest payments.

Meanwhile, the property's cash flow increased to $132.7 million in 2018, which resulted in an impressive 59 percent increase in its appraised value to $3.5 billion.

Another worthy example is the $213 million loan package

Low Interest Rates Drive Surge in CMBS Defeasance Activity


Source: Trepp LLC

Defeasance Volume

Share of Outstanding Balance by Property Type

Source: Trepp LLC


Mo. of Defeasance

Deal Name Property Name City Property Type

Balance $mln

Coupon %

DSCR (NCF)

UW Maturity Date

September OBP 2010-OBP Bank of America Tower at One Bryant Park New York City OF 650.00 4.65 4.30 7/13/2020

May FTST 2006-4TS Four Times Square (The Conde Nast Buliding)

New York City OF 536.23 5.59 2.53 12/11/2020

May CGRBS 2013-VNO5 666 Fifth Avenue New York City RT 390.00 3.61 2.93 3/6/2023

February CGBAM 2015-SMRT StorageMart Portfolio Various SS 312.57 3.80 1.83 4/6/2020

November GSMS 2016-GS4 225 Bush Street San Francisco OF 213.00 3.68 4.70 11/6/2021

July MSC 2013-WLSR Wilshire Courtyard Los Angeles OF 193.00 3.53 1.22 1/7/2020

January ACRE 2010-ARTA ART Portfolio-A2FX Various WH 150.33 4.96 2.34 1/11/2021

July UBSCM 2012-C1 Dream Hotel Downtown Net Lease New York City OT 120.00 5.18 1.27 3/6/2032

January JPMCC 2012-C6 200 Public Square Cleveland OF 117.40 4.82 1.63 4/1/2022

February MSBAM 2013-C9 Colonnade Office Addison, Texas OF 109.52 4.26 1.68 4/1/2023

April CGCMT 2015-GC29 3 Columbus Circle New York City OF 100.00 3.61 1.91 3/6/2025

October GSMS 2013-GC13 345 Park Avenue South New York City OF 100.00 4.43 2.21 6/6/2023

January GSMS 2011-GC3 Inland / Centro JV Portfolio I Various RT 94.48 5.91 1.69 12/6/2020

September COMM 2015-CR23 DFW / Raleigh Portfolio Various MF 93.66 4.43 1.57 4/6/2025

October COMM 2013-CR11 Metro 22 Portfolio Various SS 90.00 5.14 2.58 8/6/2023

January COMM 2014-LC17 80 and 90 Maiden Lane New York City OF 90.00 4.26 1.57 9/6/2019

April COMM 2015-CR23 3 Columbus Circle New York City OF 90.00 3.61 1.91 3/6/2025

November JPMBB 2013-C14 589 Fifth Avenue New York City MU 87.50 4.09 2.24 6/1/2023

November JPMCC 2013-C13 589 Fifth Avenue New York City MU 87.50 4.09 2.24 6/1/2023

January GSMS 2011-GC3 Inland / Centro JV Portfolio II Various RT 86.53 5.91 1.85 12/6/2020

October CGCMT 2014-GC23 Hyatt NYC Portfolio New York City LO 85.06 4.30 1.62 7/6/2024

April COMM 2015-CR22 3 Columbus Circle New York City OF 85.00 3.61 1.91 3/6/2025

April DBJPM 2016-C3 Center 21 Oakland, Calif. OF 83.00 4.14 2.16 7/1/2026

January WFRBS 2011-C3 Hilton Minneapolis Minneapolis LO 82.89 5.46 1.51 5/1/2021

January ACRE 2010-ARTA ART Portfolio-D Various WH 82.60 7.45 2.34 1/11/2021

November WFRBS 2011-C5 Puck Building New York City MU 81.07 5.35 1.74 7/1/2021

January MSBAM 2012-C5 US Bank Tower Denver OF 80.01 4.67 1.11 7/1/2022

June JPMCC 2016-JP2 Center 21 Oakland, Calif. OF 80.00 4.14 2.28 7/1/2026

July WFRBS 2013-C13 188 Spear Street and 208 Utah Street San Francisco OF 79.80 3.73 2.74 3/1/2023

October MSBAM 2013-C10 Goodyear Global HQ Office Akron, Ohio OF 75.40 4.20 1.76 4/1/2038

January JPMBB 2015-C27 One Campus Martius Detroit OF 75.00 4.59 2.51 1/6/2020

April WFCM 2015-LC20 3 Columbus Circle Oakland, Calif. OF 75.00 3.61 1.91 3/6/2025

August WFCM 2015-C30 Somerset Park Apartments Troy, Mich. MF 73.50 4.55 2.49 7/6/2025

June GSMS 2012-GCJ9 9201 Sunset West Hollywood OF 70.00 3.95 3.36 11/6/2022

July WFCM 2015-LC22 Somerset Park Apartments Troy, Mich. MF 70.00 4.55 2.49 7/6/2025

Top Defeased Loans - 2019

against the 575,363-sf office building at 225 Bush St. in San Francisco. That loan was securitized through GS Mortgage Securities Corp. II, 2016-GS4, and GSMS 2017-GS5.

The interest-only loan—a $122 million senior mortgage and $113 million subordinate note—wasn't set to mature until 2021 and paid a blended coupon of 3.951 percent, requiring $8.4 million of annual interest payments. The property, owned by the Kylli Inc. unit of Genzon Investment Group of China, in 2017 had generated $19.8 million of cash

flow and was appraised at a value of 450 million.The loan was defeased with proceeds of a $306 million loan

that was included in the collateral pool for three transactions: Benchmark Mortgage Trust, 2019-B14; COMM, 2019-GC44; UBS Commercial Mortgage Trust, 2019-C18; and CF Trust, 2019-CF3.

That five-year loan pays a coupon of 3.303 percent, requiring $10.1 million of annual interest payments. But the property, whose appraised value has increased to $589 million, now generates $24.5 million of cash flow.


Source: Trepp LLC


By Orest Mandzy

Crowdfunding, the process of raising capital from a large number of people via the

Internet, is finally starting to gain traction in the commercial real estate world.

The most-active platforms say they've been able to substantially increase the amount of capital they've raised for properties and have successfully opened the sector to thousands of investors, mostly accredited, who otherwise wouldn't be able to invest.

Some platforms, namely FundRise and Realty Mogul, have even pursued non-accredited investors through non-traded REITs they've launched.

Realty Mogul, which launched its platform roughly five years ago, has 180,000 registered users on its platform and 20,000 of those have invested in the Los Angeles company's offerings. And CrowdStreet, which was founded around the same time, was able to fully fund a $25 million offering on its site within four hours.

FundRise, meanwhile, has participated in 281 properties valued at $3.9 billion. The Washington, D.C., company had raised a total of $856 million, including $422 million on behalf of its seven eREITs as of the end of 2018. The company also raised capital that was used to invest in 3 World Trade Center, a 2.5 million-square-foot office building in lower Manhattan.

Crowdfunding was facilitated by the Jumpstart Our Business Startups, or JOBS, Act of 2012, which allowed sponsors to raise capital in small increments from the public. Soon after, dozens of entrepreneurs launched efforts to offer investments in commercial real estate, both equity and debt. What initially was viewed as a modernization of the old syndication model morphed into something broader.

It couldn't come at a better time. Even investment managers, which traditionally have raised capital solely from institutional investors to fill their commercial real estate allocations, have started eying ways of getting in front of retail investors. Blackstone Group, Starwood Capital Group and Oaktree Capital Management each have launched efforts to reach retail investors, which they view as a relatively untouched capital source.

After all, the country has more than 12 million accredited investors, meaning those with net worths of at least $1 million. And not all have exposure to commercial real estate. Crowdfunding entrepreneurs figured they could supplement the capital real estate sponsors typically had raised with funding from the investors they would tap.

Crowdfunding capital was "meant to be additive," explained Adam Kaufman, founder and head of ArborCrowd of New York, which is affiliated with Arbor Commercial Mortgage

and sticks solely to the multifamily sector. He founded ArborCrowd in 2016 "as a way to bring in a new class of investors to meet a need we saw from borrowers." That need typically has taken the form of what Kaufman called "gap equity," the difference between the common equity a sponsor might be able to raise for a property and the debt financing that's typically lined up. Initially, at least, crowdfunding platforms typically raised preferred equity and debt. They've now broadened their offerings to include other pieces of a property's capital stack.

Crowdfunding platforms might have raised more than $2 billion over the past couple of years. That's relatively insignificant when compared with the $440 billion of property sales that took place last year through October, according to Real Capital Analytics, and the $652 billion of commercial mortgage originations that the Mortgage Bankers Association had predicted for 2019. But it represents capital that otherwise wouldn't be invested in the sector.

Jilliene Helman, founder and chief executive of Realty Mogul, conceded that the adoption curve for real estate crowdfunding was longer than many had hoped. But given recent successes, the industry appears to be gaining traction. Helman said Realty Mogul has raised and invested $500 million of capital in some $2 billion of properties. It could have raised more. But "we're very cautious because of where we are in the market," she said, noting that every prospective deal first goes through a thorough vetting by Realty Mogul before it's offered. "We have a long-term view of the market," she said.

When Realty Mogul, like a number of other crowdfunding platforms, agrees to raise capital for a property, it first will write a check, eliminating the sponsor's syndication risk. It then taps its investor community.

For the most part, crowdfunding has been used to raise capital for middle-market properties, where less than $10 million of capital needs to be raised. But that's not always the case. Tore Steen, co-founder and chief executive of CrowdStreet, said his site has been used to raise capital for projects as large as $100 million.

Last September, Parkway Property Investments turned to CrowdStreet, of Portland, Ore., to raise $25 million to fund the purchase and renovation of 100 Edgewood, a 306,000-sf office building in an opportunity zone in downtown Atlanta. The capital was raised within four hours.

Steen said the average investor on CrowdStreet will invest $45,000 at a clip, and has a total of more than $250,000 invested in CrowdStreet-sourced deals. Some investors have written checks of as much as $250,000 in a single deal and have more than $1 million invested through the site. The site's minimum investment is $25,000.

"A good majority (of CrowdStreet's investors) wouldn't otherwise have invested" in real estate, Steen said. But he noted that many previously had, typically making up the friends and family equity component of a local sponsor's deal. The CrowdStreet platform allows those investors to diversify

Crowdfunding Starts Gaining Ground in Commercial Real Estate

Continued on page 18


Alvarez & Marsal Artemis Bank of America BlackRock Blackstone Bloomberg LP Boston Realty Advisors Brickman CBRE Cushman & Wakefield Deloitte Ernst & Young Fidelity Investments Garrison Investment Grant Thornton Integra Realty Resources

Jones Lang LaSalle J.P. Morgan KPMG Marcus and Millichap Merrill Lynch Prudential PWC RXR Realty Savills Silverpeak Argentic SL Green Tishman & Speyer Trilantic Capital Partners UBS Wealth Management Vanguard Wells Fargo

[email protected] https://business.lehigh.edu/centers/goodman-center-for-real-estate

Innovative Real Estate Education

The real estate program at Lehigh University offers a fresh curriculum with hands-on experiences which enable students to expand their knowledge and prepare for real estate careers. Coursework provides ample opportunity for students to engage with both academic faculty and industry practitioners as they dig into case studies, modeling, and “real world” projects. Real estate courses are open to all students at Lehigh University, irrespective of the home college or department. Classes are taken in parallel with a student’s chosen academic major and, consistent with the multidisciplinary nature of the industry, integrates topics across a wide range of fields.

Examples of Employment Upon Graduation

Real Estate Practicum Capstone As a culminating academic experience, student teams complete a deep dive into a specific commercial property. They study all aspects of property value, ranging from its physical attributes to the dynamics of its operating environment, and compile a report with in-depth analysis. Leading data sources (such as Trepp and CoStar) and applications (such as ARGUS) are utilized. The intensive experience is showcased in a team competition before a panel of industry judges for a cash prize -- generously endowed by proud alumni.


their investments geographically, by property type and sponsor.

While CrowdStreet's bread-and-butter is serving as the conduit between property sponsors and the site's 73,000 registered investors, it also offers its site to third parties. KBS Realty Advisors, for instance, has adopted a private-label version of the CrowdStreet platform to market one of its non-traded REITs, KBS Growth & Income REIT Inc.

Since CrowdStreet's founding, it's raised $900 million. It expected to raise more than $500 million last year. "We're at an inflection point right now," Steen said, pointing out that while e-commerce still accounts for less than 30 percent of all retail sales, it has had a profound impact on how retailers do business. Crowdfunding could do the same, changing how sponsors assemble the puzzle pieces that make up their properties' capital stacks.

Continued from page 16

By Catherine Liu

A total of $109.6 billion of CMBS mortgages are up for refinancing over the next two

years, with $57.6 billion coming due in 2020 and $52 billion the following year.

A total of 65.8 percent of the maturing loans serve as collateral for single-asset, single-borrower CMBS transactions. Conduit loans make up 29 percent of the total.

Short-term loans against hotels account for $31.7 billion, or 28.9 percent of the total coming due. That's the result of the heavy acquisition and brand consolidation activity within the hotel segment in recent years.

Office and retail comprise 21.6 percent and 23.2 percent of the total coming due, respectively.

While interest rates have remained extremely low for the past two years, helping keep the incidence of maturity defaults low, the risk is that rates would increase, which could lead to a rise in such defaults.

We've reviewed the $31.6 billion of conduit loans maturing from now through 2021 and examined whether they would pass certain refinancing thresholds based on prevailing loan-to-value and debt-service coverage ratios and debt-yield requirements. We removed from our universe loans marked as delinquent, fully-defeased and those tied to properties generating negative net operating income, leaving a sample size of $26.3 billion.

To generate updated DSCR and appraised collateral value for the maturing loans, we calculated average coupons, based on property type and geography, and paired that with the most recently reported NOI data. In each case, the geographic thresholds were used only

when they were less restrictive than the average rates for the property type overall.

We assumed maturing loans would be taken out by loans that do not amortize and calculated appraised collateral values using average capitalization rates from recent loan originations. Those appraised values were also used to make LTV calculations. As an additional test, current debt yields were computed using most recently available NOI data and outstanding loan balances.

With these new loan performance metrics calculated, new DSCR and LTV figures were then determined according to

CMBS Conduit Loans Maturing Through

2021 Face Few Refinancing Hurdles


*Based on average underwritten values for CMBS conduit loans securitized from June to December 2019

Source: Trepp LLC

Underwriting Overview of Recently Originated Conduit Loans

Coupon Rate %

Cap Rate %

LTV Debt Yield %

DSCR

Industrial 4.26 6.69 60.85 11.69 2.08

Lodging 4.53 8.72 62.16 15.07 2.16

Multifamily 4.15 5.57 60.91 11.28 2.02

Office 4.13 6.74 62.30 13.03 2.17

Retail 4.30 6.58 63.86 11.76 1.93

Other 4.11 5.50 49.51 20.13 3.81

All 4.23 6.47 59.11 14.44 2.50

Maturing CMBS Overview 2019-2021 (Conduit, Non-Defeased, Non-Delinquent)

Source: Trepp LLC


several rate hike assumptions. In the case of the debt-yield test, the threshold for qualifying for a full refinancing was raised by the assumed interest-rate increase. The criteria used for passing each refinancing test were customized based on lending trends specific to the corresponding metropolitan statistical area and property type. Generally speaking, property values decline and debt service requirements increase as interest rates increase, assuming all other variables remain the same.

On average, conduit loans issued over the second half of 2019 carried a coupon of 4.23 percent, down from 5.11 percent during the latter half of 2018, while cap rates have fallen about 51 basis points during this period to 6.47 percent. At the same time, underwriting metrics strengthened in 2019—the average conduit debt yield climbed to 14.44 percent, while DSCR trended up to 2.5x, just as leverage dipped to 59.11 over the past six months. This compares to origination averages of 11.67 percent, 1.76x and 61.95 for these respective categories during the second half of 2018.

If current rates hold steady, 85.31 percent of conduit loans maturing through 2021 (by balance) would meet their respective DSCR requirements. From the same pool of loans, 64.36 percent would pass their debt-yield thresholds and 69.57 percent would clear their LTV hurdles, with more than 64 percent qualifying for refinancing under all three tests.

This is a notable improvement from a similar analysis conducted at year-end 2018, which examined the refinancing

outlook of outstanding loans that were scheduled to come due by 2020. The pass rates for DSCR, debt yield and LTV based on prevailing rates at the time were 74.09 percent, 59.19 percent and 63.50 percent, respectively, while almost 60 percent of conduit loans were considered refinanceable by all three measures. While the outcome may be surprising given the higher refinancing thresholds that must be met, based on 2019's underwritten metrics, it could be reflective of the stronger credit performance of today's outstanding loans as somewhat weaker legacy securitizations continue to be resolved.

If interest rates increased by 50 to 100 basis points, however, the volume of maturing CMBS loans that would meet each refinancing measure would fall by 5 to 15 percent. Increases in interest rates would result in the most significant percentage of loans being eliminated from the LTV refinanceable bucket, while the debt-yield hurdle has the lowest pass rates for each interest-rate assumption. The DSCR test proved to be the qualification barrier that was easiest to hurdle.

From a property-type standpoint, any 25-bp increase in interest rates would shuffle the largest percentage of multifamily assets out of refinance potential while hotel loans generally had the most difficulty in reaching any origination parameter used. Industrial, on the other hand, boasts the highest share of loans that would be eligible for new financing.

As the credit characteristics of CMBS loans remain at sound levels and property fundamentals continue to hold up, the mortgage sector, and CMBS specifically, should remain in calm waters, even if interest rates climb.


Source: Trepp LLC

DSCR Distribution

Source: Trepp LLC

Debt Yield Distribution

Source: Trepp LLC

Cap Rate Distribution

Source: Trepp LLC

CMBS YoY NOI Growth & Issuance Volume

19892002First CRE CDO Deal Issued

2013

Blockchain technology applied in real estate transactions (tokenizations).PA G E 7Regus (now IWG

PLC) Forms Office Sharing BusinessPA G E 4

2009Ten-X (Previously Auction.com) begins auctioning off CMBS properties and loans

2005Markit Partners Introduces CMBX as Derivative to Gain Exposure to CMBS Market

1998CMSA (Now CREFC) Introduces IRPPA G E 8

1994Nomura Issues First CMBS Mega-Deal

1996Trepp and Charter Conquest Pivot to Create CMBS Specific Analytics

AirBnB FoundedPA G E 11

2008

2018

2012JOBS Act Passed Into Law, Opening Path for CrowdfundingPA G E 1 6

2000WeWork FormsPA G E 4

2010The Realm raises $150 million to create b-to-c CRE company.PA G E 7

First Single-Family Rental Securitization

SOME CRE DISRUPTIONSO V E R T I M E



By Lisa Pendergast, David McCarthy, Christina Zausner and Raj Aidasani

Nearly 10 years after its enactment, the Dodd-Frank rulemaking cycle will

be winding down. With that, the 2020 policy slate will shift to some major headline issues, including the Libor transition, reform of the government-sponsored enterprises (Fannie Mae and Freddie Mac) and relief for lenders complying with the anti-money laundering Beneficial Ownership requirements.

To be fair, a lingering Dodd-Frank/Basel III rule is slated to be finalized this year. The second of two liquidity requirements called the net stable funding ratio (NSFR) is targeted for adoption by all three bank regulatory agencies (Federal Reserve, Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency) in the first quarter. Once the NSFR enters this final stage, the policy challenges facing the commercial real estate (CRE) finance community will largely shift toward broader-based issues that generally apply homogeneously to all asset classes.

This is significant, because many of the Dodd-Frank requirements apply asymmetrically across asset classes and often treat CRE finance products relatively more harshly than residential mortgages and other commercial products. The 2020 policy season portends significant change with outsized execution risks.

With respect to the Libor transition alone, there is roughly $220 trillion in dollar-denominated exposure and $370 trillion globally.

A poorly planned exit for Fannie and Freddie from conservatorship could roil markets around the globe, while anti-money laundering compliance is increasingly tricky and violations can carry stiff fines and reputational risks. And while policy-related risks are inordinately high this year, they don't threaten to weigh more heavily on CRE finance than on other asset classes, as had many of the previous accounting, capital, liquidity and securitization regulations of the Dodd-Frank era.

The Big Bang in Benchmarks: The Global Transition from Libor to SOFR

Libor, or the London Interbank Offered Rate, has been called the world's most important number. Yet, Libor-related scandals and concern that this floating-rate

benchmark is based on an inadequate number of underlying transactions led the UK's Financial Conduct Authority in 2017 to announce it would no longer compel banks to submit Libor quotes after 2021. Not surprisingly, the FCA's pronouncement galvanized global efforts to transition to new reference rates.

In the United States, where some $200 trillion of dollar-denominated Libor contracts and $1.3 trillion in CRE debt indexed to Libor are outstanding, the Board of Governors of the Federal Reserve and the New York Fed formed the Alternative Reference Rates Committee (ARRC) to identify a replacement rate for U.S. Libor. In June 2017, the ARRC selected the Secured Overnight Financing Rate (SOFR) as the replacement. SOFR is produced by the N.Y. Fed and is a broad measure of the cost of borrowing cash collateralized by Treasury securities on an overnight basis.

The Commercial Real Estate Finance Council (CREFC) is a member of the ARRC and co-chair of the Securitization Working Group (SWG), along with the Structured Finance Association (SFA). In the CRE structured-debt space, there is an estimated $200 billion in securitized floating-rate debt outstanding, comprised largely of agency CMBS, private-label CMBS and CRE collateralized loan obligations. The SWG was charged with the development of fallback language for securitizations that can be used by the markets in the legal drafting of credit agreements. The language details the steps to be taken to replace Libor if it's no longer available or deemed to be non-representative.

The uptake of the SOFR fallbacks by the CRE/multifamily finance markets, while slow initially, has begun to accelerate with both CMBS and CRE CLO issuers incorporating the language in full or in part in offerings. However, some issuers are modifying some of the fallback language, causing some consternation among investors, given that the lack of uniformity requires that they parse through each deal to understand any differences. Those could lead to disparities in the way bonds trade in secondary markets. Loan and bond servicers are likely to have similar concerns as even subtle variations in language have the potential to increase operational complexity.

For now, a precise path to transition is blurred by the potential that a SOFR term structure won't be available by year-end 2021. Term rates will materialize once the derivatives market gains sufficient volume. To the good, markets are developing best-practices for using overnight SOFR rates that are adjusted via a compounded or simple average rate for 1-, 3-, and 6-month terms.

The methodologies available include a simple average, or a compounded average either "in advance" or "in arrears," with the "in arrears" having the advantage of being more forward-looking, but having the disadvantage of the rate not being available until the end of the interest accrual period. While an "in advance" compounding calculation is simpler with the rate available at the outset of the interest accrual

Shifting from Post-Crisis Regulation to Fresh Policy Challenges in 2020

Continue on next page


period, and would involve minimal changes to existing operational infrastructure, it does not capture the forward expectations of rates.

The N.Y. Fed plans to begin publishing daily compounded in arrears averages of SOFR with tenors of 1-, 3-, and 6-months at some point during the first half. This form of compounding aligns with the methodology that the International Swaps and Derivatives Association plans to use in the derivatives markets, including swap contracts. CREFC will continue to work with our members to develop best-practices around the compounding methodology and processes and procedures for efficiently servicing loans and securities.

GSE Reform Takes Flight Under New FHFA Management

As Fannie and Freddie mark their 11th year in conservatorship, sincere legislative efforts have lost steam while administrative change has been ignited with the entry last year of new Federal Housing Finance Agency (FHFA)Director Mark Calabria. Shortly after his confirmation, the Treasury released its Housing Finance Reform Plan that targets an exit from conservatorships for the GSEs as its primary goal.

Since then, Calabria has been working through his task list, overhauling the caps and exemptions for GSE multifamily loan purchases, allowing the GSEs to accumulate more capital, and new oversight of pilot programs.

Here is a recap of what has happened and the administrative actions the FHFA is expected to take during the first half of the year:

• Sept. 5: Treasury files Housing Reform Plan. • Sept. 13: FHFA amends 2019 scorecard to reset

multifamily caps to $100 billion for each GSE, eliminates exceptions and requires 37.5 percent of purchase volume to be mission-driven. Loans under the respective Green-lending programs are no longer exempt.

• Sept. 30: FHFA amends the Preferred Stock Purchase Agreement (PSPA) to suspend the Net-Worth Sweep to allow the GSEs to build capital.

• Early 2020: FHFA will re-propose regulatory capital rules for the GSEs. Possible further amendments to PSPA.

Those actions do not need acts of Congress, and anticipate that the GSEs would continue to operate under their existing charters granted under the Housing and Economic Recovery Act of 2008. Congress, however, would have to act in order to fully reform the GSEs, including any revisions to their government guarantees. With a divided Congress and in the shadow of the 2020 elections, it's unlikely that a legislative solution will be enacted this year.

The Customer Behind the Curtain: Beneficial Ownership Relief

Beneficial Ownership reporting is a complement to other "Know Your Customer" and due diligence programs

that aim to prevent money laundering and of the use of shell companies to disguise illicit activities. Generally, the Beneficial Ownership rule requires covered financial institutions to develop processes and procedures to identify and verify natural person owners of legal entity customers when they open new accounts. Under the Beneficial Ownership rules, covered financial institutions must identify and verify the identity of (1) any individual who owns 25 percent or more of a legal entity, and (2) any individual who controls the legal entity (for instance, its chief executive.)

Since most real estate transactions involve legal entities specifically set up for individual transactions, regulated financial institutions now must collect and maintain additional customer data with each new account—burdensome for lenders, borrrowers and their intermediaries.

Several legislative efforts would reform the Beneficial Ownership reporting requirements by implementing a nationwide standard that would require limited liability companies and corporations to report ownership information at their formation to the Treasury's Financial Crimes Enforcement Network (FinCEN). Such a system would ease the compliance burden for CRE finance professionals. In lieu of collecting information for every single transaction, lenders could simply obtain a consent from the borrower and download the information from the FinCEN repository.

Last October, the House passed H.R. 2513: The Corporate Transparency Act of 2019, a bipartisan bill that would require legal entities to report the beneficial ownership by natural persons to FinCEN.

A concurrent, bipartisan effort to address the issue is underway in the Senate.

A month earlier, a bipartisan group of senators unveiled financial crimes legislation, the Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings, or ILLICIT CASH Act, S. 2563, that includes provisions similar to H.R. 2513 to address the issue of beneficial ownership reporting.

CREFC supports the Corporate Transparency Act and similar legislation as it will streamline reporting requirements while implementing a more effective system to detect and prevent illicit finance.

Lisa Pendergast is executive director of CREFC, David McCarthy is director supporting CREFC's policy and government relations team, Christina Zausner is senior director and head of policy analysis at CREFC, and Raj Aidasani is senior director of research at CREFC.


Access Commercial Real Estate Direct online. Sign up or start a free trial at www.crenews.com

or call 212-329-6239.

The most important news in the market, direct to your inbox.


2019 Conduit Issuance

Source: Commercial Real Estate Direct

Px Date

Deal Name

Amt $mln

AAAJrLvl%

RiskRetention

Type

Vertical Size %

Horizontal Size

(of par) %

Risk Retention

Party

UWDSCR

PxAAA-Sr

PXJRAAA

PXBBB-

10yrTreasury

Yield

1-Feb BANK 2019-BN16 974.84 18.88 Vertical 5.00 WF/BoA/MS 2.24 94 120 425 2.70

1-Feb BMARK 2019-B9 883.52 22.63 Vertical 5.00 Citi/DB/JPM 1.72 95 120 410 2.70

13-Feb GSMS 2019-GC38 756.44 22.00 Horizontal 9.70 KKR 2.06 91 110 2.71

15-Feb JPMCC 2019-COR4 774.09 24.25 Horizontal 9.50 LoanCore 1.66 99 125 400 2.66

21-Feb WFCM 2019-C49 774.23 24.00 Horizontal 10.39 KKR 1.76 98 120 2.69

28-Feb CSAIL 2019-C15 829.25 22.50 Horizontal 10.05 Grass River 1.92 98 118 2.73

1-Mar MSC 2019-L2 934.87 21.00 Hybrid 2.02 7.05 MS, Rialto 2.17 98 119 350 2.76

21-Mar BANK 2019-BN17 833.03 19.75 Vertical 5.00 MS/WF/BoA 2.41 84 110 340 2.54

21-Mar BMARK 2019-B10 1,256.00 20.13 Vertical 5.00 Citi/DB/JPM 1.97 84 110 345 2.54

27-Mar UBSCM 2019-C16 682.67 19.00 Horizontal 9.75 KKR 2.08 94 122 2.39

16-Apr CF 2019-CF1 758.00 20.88 Hybrid 3.94 2.83 Starwood 2.04 86 110 340 2.60

29-Apr WFCM 2019-C50 937.97 20.88 Vertical 5.00 Rialto 1.83 86 115 340 2.54

9-May GSMS 2019-GC39 802.54 19.50 Hybrid 3.66 4.09 GS/Citi 2.16 80 105 335 2.45

17-May BBCMS 2019-C3 936.65 20.63 Horizontal 10.17 KKR 1.93 89 120 2.39

21-May BANK 2019-BN18 1,036.78 20.88 Vertical 5.00 BoA/MS/WF 2.80 86 110 325 2.43

22-May BMARK 2019-B11 1,099.05 18.00 Vertical 5.00 DB 2.30 86 110 335 2.39

5-Jun MSC 2019-H6 686.83 20.75 Horizontal 10.13 KKR 2.09 97 125 2.12

12-Jun JPMCC 2019-COR5 698.64 21.75 Horizontal 8.62 LoanCore 1.79 97 125 2.13

18-Jun CSAIL 2019-C16 787.51 21.88 Horizontal 10.29 Prime Finance 1.87 100 128 280 2.06

21-Jun WFCM 2019-C51 729.48 21.50 Horizontal 10.50 Prime Finance 1.97 98 125 2.07

26-Jun GSMS 2019-GC40 1,035.40 18.75 Hybrid 2.51 5.66 Citi/DB/GS, Eightfold

2.64 87 112 335 2.05

15-Jul MSC 2019-H7 746.99 21.63 Horizontal 10.37 Argentic 2.01 89 115 2.09

19-Jul BMARK 2019-B12 1,429.30 17.50 Hybrid 2.88 5.59 Citi/DB/JPM, KKR

2.50 80 110 335 2.05

23-Jul BANK 2019-BN19 1,302.47 17.63 Vertical 5.00 BoA/MS/WF 2.82 84 110 335 2.03

5-Aug CGCMT 2019-GC41 1,276.63 21.13 Hybrid 3.47 6.76 Citi/DB/GS, Rialto

2.48 92 107 1.75

5-Aug WFCM 2019-C52 900.24 19.63 Horizontal 10.62 Argentic 2.14 93 118 1.75

9-Aug CD 2019-CD8 811.12 23.75 Hybrid 3.21 5.20 DB/Cantor/Citi, Eightfold

2.32 100 121 340 1.74

9-Aug BBCMS 2019-C4 937.34 19.25 Hybrid 4.23 Rialto 2.15 100 125 375 1.74

13-Sep BANK 2019-BN20 1,237.48 17.50 Vertical 5.00 MS/BoA/WF 2.39 92 115 315 1.90

16-Sep GSMS 2019-GC42 1,060.43 20.50 Hybrid 2.33 6.84 GS/DB/Citi, KKR 2.66 94 115 340 1.84

17-Sep CSAIL 2019-C17 800.42 24.13 Horizontal 11.01 3650 REIT 1.77 99 125 1.81

23-Sep BMARK 2019-B13 951.71 21.75 Hybrid 3.36 4.83 Citi/DB/JPM, Eightfold

2.12 97 120 340 1.72

26-Sep UBSCM 2019-C17 807.34 22.50 Hybrid 3.88 4.69 Rialto 2.08 102 130 325 1.70

26-Sep CF 2019-CF2 832.91 21.63 Hybrid 4.10 3.87 Starwood 2.27 96 120 345 1.70

30-Sep BANK 2019-BN21 1,181.00 22.50 Vertical 5.00 BoA/MS/WF 2.42 94 118 315 1.68

22-Oct WFCM 2019-C53 702.17 25.75 Horizontal 11.36 KKR 1.97 98 126 265 1.78

25-Oct BANK 2019-BN22 1,202.15 19.75 Vertical 5.00 MS/BoA/WF 2.90 92 115 320 1.80

30-Oct GSMS 2019-GSA1 864.24 21.38 Hybrid 2.41 7.20 GS, Argentic 2.29 99 128 410 1.78

29-Oct CGCMT 2019-GC43 936.87 24.00 Hybrid 3.76 4.45 GS/Citi, Rialto 2.47 95 121 1.84

5-Nov BBCMS 2019-C5 1,001.32 20.25 Hybrid 3.70 6.98 Key/Barc/Natixis, Prime/

Eightfold

2.39 95 125 350 1.86




Px Date

Deal Name

Amt $mln

AAAJrLvl%

RiskRetention

Type

Vertical Size %

Horizontal Size

(of par) %

Risk Retention

Party

UWDSCR

PxAAA-Sr

PXJRAAA

PXBBB-

10yrTreasury

Yield

2019 Conduit Issuance - Continued

5-Nov BMARK 2019-B14 1,468.65 20.13 Hybrid 2.50 6.46 JPM/Citi/DB, KKR

2.30 93 123 355 1.86

8-Nov WFCM 2019-C54 669.83 23.13 Horizontal 10.84 Argentic 2.21 98 128 1.94

8-Nov MSC 2019-L3 1,021.17 20.75 Hybrid 4.13 3.38 Starwood 2.40 94 130 375 1.94

14-Nov JPMDB 2019-COR6 807.18 22.88 Hybrid 2.23 6.84 LoanCore 2.18 100 135 350 1.82

20-Nov COMM 2019-GC44 1,118.69 18.00 Hybrid 3.71 3.74 GS/DB/Citi, Rialto

2.58 94 125 350 1.73

20-Nov CSAIL 2019-C18 689.01 22.38 Hybrid 4.12 4.00 Rialto 2.16 100 135 360 1.73

21-Nov BANK 2019-BN23 1,287.02 19.50 Vertical 5.00 MS/WF/BoA 2.73 92 120 330 1.77

25-Nov BMARK 2019-B15 846.61 22.50 Hybrid 3.33 7.73 Citi/DB/JPM, Eightfold

2.31 92 122 365 1.76

9-Dec CF 2019-CF3 789.13 19.00 Hybrid 2.90 6.58 Key, KKR 2.67 91 120 375 1.83

11-Dec UBSCM 2019-C18 743.57 20.25 Hybrid 4.21 3.75 Rialto 2.33 96 130 415 1.79

11-Dec BANK 2019-BN24 1,225.92 19.25 Vertical 5.00 BoA/MS/WF 3.23 88 120 315 1.79

12-Dec CGCMT 2019-C7 1,139.15 23.63 Hybrid 3.75 4.17 Starwood 1.99 94 125 360 1.90


By Orest Mandzy

Citigroup was the most active bookrunner of domestic, private-label CMBS last

year. It also took top honors among CMBS loan contributors.

It's the first time in the CMBS 2.0 era that Citi has won top honors among bookrunners. It received credit for 15.1 deals totaling $12.6 billion, and participated as bookrunner in a total of 37 deals, or more than a quarter of the 140 transactions the market saw last year.

The year's total volume was $96.7 billion, up 27 percent from 2018's $76.1 billion of issuance. It was the heaviest year of issuance since the Great Financial Crisis. A total of 52 deals with a balance of $49.2 billion were conduits and 84 totaling $46.4 billion were single-borrower deals. The remainder were either backed by floating-rate transactions or small-balance loans.

Citi dethroned JPMorgan Securities among bookrunners,

which ended the year in third place in a ranking of bookrunners, a tad behind Morgan Stanley, which ran the books on $11.5 billion of deals. JPMorgan handled the books on 18.7 deals totaling $11.4 billion, up from the 17.7 deals totaling $10.6 billion in 2018.

Meanwhile, Citi contributed loans to 36 transactions, or more than a quarter of the year's total. That included 236 loans with a balance of $5.1 billion to 17 conduit transactions, or one-third of the year's conduit deals, and 8.8 loans totaling $6.3 billion to 19 single-borrower deals, or 23 percent of that subtotal. The latter included a quarter of the $5.6 billion loan that was securitized in December and provided some of the funding for Blackstone Group's $18.7 billion purchase of 179 million square of industrial space from Global Logistic Properties.

Citi's loan contributions to the CMBS market were up 56 percent from 2018's $7.3 billion total.

The number of lenders that had contributed loans to CMBS remained unchanged from 2018 at 27. But three lenders that participated then—Blackstone Mortgage Trust, Basis Real Estate and Bank of China—were absent

Citigroup Tops CMBS Bookrunner, Loan Contributor Rankings for First Time Since Crisis




CMBS Risk-Retention Structures - 2019

Total Conduit Single-Borrower Other

#Deals Bal $mln MktShr% #Deals Bal $mln Mkt Shr% #Deals Bal $mln MktShr% #Deals Bal $mln Mkt Shr%

Horizontal 50 38,728.37 40.29 15 11,475.44 23.35 32 26,178.13 57.24 3 1,074.80 87.28

Vertical 65 34,165.84 35.55 13 14,457.23 29.41 51 19,551.91 42.76 1 156.70 12.72

Hybrid 24 23,221.28 24.16 24 23,221.28 47.24 0 0.00 0.00 0 0.00 0.00

Total 139 96,115.50 52 49,153.96 83 45,730.04 4 1,231.50

from 2019's list of contributors. They were replaced by 3650 REIT, which contributed 36 loans totaling $729.23 million; MUFG Principal Commercial, which contributed $250.7 million of loans, but since has quit the business; and BMO Financial Group, which participated in one loan that was securitized.

The CMBS business was developed primarily to provide long-term financing for middle-market properties. The data show that most lenders that participate in the sector do just that in that the average securitized loan last year had a balance of $32.7 million. But some contributors' numbers are skewed by their activity in the large-loan business.

The average loan that Credit Suisse contributed to CMBS had a balance of $94.7 million. While it contributed 35 loans with a balance of $952 million, for an average loan size of $27.2 million, to four conduit deals under the CSAIL Commercial Mortgage Trust shelf, it contributed 4.2 large loans, with a balance of $2.8 billion, to six single-borrower transactions. Those included its share of a $1.4 billion loan, securitized through Credit Suisse Mortgage Securities Corp., 2019-ICE4, against a portfolio of 64 cold-storage facilities owned by Lineage Logistics.

The most-active lenders with the smallest average loan size include Ladder Capital Finance, with an $11.4 million average, Rialto Mortgage Finance, with a $12 million average and Starwood Mortgage Finance, with a $12.9 million average.

Overall conduit issuance last year topped 2018's issuance by a whopping 22.4 percent. Separately, 29 collateralized loan obligations totaling $19.2 billion priced during the year. That was up 33 percent from 2018's $14.2 billion of issuance. Wells Fargo Securities once again topped a ranking of bookrunners of CLOs, with $5.9 billion of volume, or nearly 31 percent of the year's total.

A ranking that gives full credit to every manager on CMBS deals once again had Drexel Hamilton on top. It was a co-manager on 48 transactions with a total balance

of $43.7 billion, or 45.3 percent of the year's total issuance. Deutsche Bank and Academy Securities were behind it, with 38.2 percent and 37.2 percent market shares, respectively. Drexel Hamilton and Academy, as well as Bancroft Capital, which was a co-manager on eight deals totaling $7.2 billion, are veteran-owned businesses.



2019 2018

Investment Bank

Credit Bal $mln

#Deals MktShr%

Credit Bal $mln

MktShr%

Citigroup 15.05 12,628.80 37 13.05 9.48 8,120.96 10.67

Morgan Stanley

15.79 11,464.69 30 11.85 10.79 7,538.21 9.90

JPMorgan Securities

18.70 11,388.65 37 11.77 17.68 10,608.13 13.94

Goldman Sachs

15.99 10,827.30 29 11.19 15.48 8,476.68 11.14

Wells Fargo Securities

13.77 10,589.96 29 10.96 12.17 7,567.17 9.94

Bank of America

Securities

12.04 9,760.01 27 10.11 7.10 5,509.86 7.24

Deutsche Bank

11.53 9,347.13 37 9.66 13.70 9,930.02 13.05

Barclays Capital

7.64 5,392.82 21 5.58 6.77 4,357.03 5.72

Credit Suisse 7.08 5,132.28 10 5.31 5.99 3,522.61 4.63

Cantor Fitzgerald

5.03 2,731.77 12 2.83 2.51 1,391.07 1.83

UBS Securities 3.08 2,279.81 11 2.36 6.37 4,475.55 5.88

Societe Generale

4.90 1,960.79 12 2.03 2.01 1,535.91 2.02

Natixis 6.19 1,806.70 9 1.87 9.97 2,945.34 3.87

KeyBank 2.02 1,230.25 8 1.27 0.00 0.00 0.00

Performance Trust Capital

1.00 156.70 1 0.16 1.00 132.30 0.17

BMO 0.20 42.84 1 0.04 0.00 0.00 0.00

Total 140 96,740.49 121.00 76,110.85

Top CMBS Bookrunners Domestic, Private-Label Issuance


REGISTER TODAY AT MBA.ORG/CREF2020

WHERE MARKET MAKERS MEET

Be a part of MBA’s Commercial Real Estate Finance / Multifamily Housing

Convention and Expo 2020 (CREF2020) and get unrivaled access to key

industry leaders, CEOs and expert panelists who discuss the latest industry

trends, regulatory developments and strategies to succeed in today’s

dynamic marketplace.

REGISTER TODAY!

2116

2

MA

NC

HES

TER

GR

AN

D H

YATT

SAN

DIE

GO

, CA

MBA’s COMMERCIAL REAL ESTATE FINANCE/MULTIFAMILY HOUSING CONVENTION & EXPO

FEBRUARY 9–12





Top Loan ContributorsTop Managers of Domestic, Private-Label CMBS

2019 2018

Lender #Loans Bal $mln

Mkt Shr %

#Loans Bal $mln

Mkt Shr %

Citibank 244.76 11,394.00 11.97 218.07 7,314.00 9.61

Goldman Sachs 155.22 10,112.57 10.63 106.83 8,665.70 11.39

Morgan Stanley 234.12 9,713.67 10.21 159.47 5,838.67 7.67

JPMorgan Chase 184.86 9,275.87 9.75 139.87 9,442.39 12.41

Deutsche Bank 149.94 9,095.42 9.56 197.62 9,010.55 11.84

Bank of America 130.54 8,672.29 9.11 105.75 4,843.48 6.36

Wells Fargo Bank 243.22 7,573.01 7.96 190.77 5,468.74 7.19

Barclays Bank 88.25 4,742.08 4.98 94.65 3,916.22 5.15

Credit Suisse 39.20 3,712.98 3.90 23.03 2,914.68 3.83

Societe Generale 74.50 2,118.78 2.23 58.73 1,576.91 2.07

Rialto Mortgage Finance

173.00 2,072.11 2.18 100.00 1,272.67 1.67

Natixis 25.00 1,964.97 2.07 73.88 3,206.98 4.21

UBS Real Estate Securities

131.20 1,964.55 2.06 141.00 2,444.22 3.21

Cantor Commercial 85.85 1,842.24 1.94 67.75 1,563.96 2.05

Argentic Real Estate

97.00 1,780.18 1.87 105.50 1,565.64 2.06

Starwood Mortgage Finance

136.40 1,759.35 1.85 109.00 1,717.95 2.26

LoanCore Capital 70.00 1,572.78 1.65 25.00 643.72 0.85

KeyBank 93.75 1,451.57 1.53 75.50 1,105.23 1.45

Ladder Capital 85.00 969.53 1.02 103.00 1,304.25 1.71

Ready Capital 184.00 829.90 0.87 50.00 164.95 0.22

3650 REIT 36.00 729.23 0.77 0.00 0.00 0.00

National Cooperative Bank

127.00 493.94 0.52 100.00 400.05 0.53

Benefit Street Partners

30.00 462.54 0.49 34.00 446.63 0.59

CIBC World Markets 38.00 345.36 0.36 40.00 359.26 0.47

MUFG Principal Commercial Capital

11.00 250.70 0.26 0.00 0.00 0.00

C-III Commercial Mortgage

41.00 207.00 0.22 57.00 253.13 0.33

BMO 0.20 42.84 0.05 0.00 0.00 0.00

Blackstone Mortgage Trust

0.00 0.00 0.00 0.50 517.50 0.68

Basis Real Estate 0.00 0.00 0.00 7.00 109.60 0.14

Bank of China 0.00 0.00 0.00 0.07 43.80 0.06

2019 2018

Investment Bank

#Deals Bal$mln

Mkt Shr%

#Deals Bal$mln

Mkt Shr%

Drexel Hamilton

48 43,732.47 45.28 41 36,385.54 47.81

Deutsche Bank 40 36,898.87 38.20 30 23,296.30 30.61

AcademySecurities

39 35,882.58 37.15 39 34,473.94 45.29

JPMorgan Securities

38 35,843.84 37.11 30 21,278.25 27.96

Citigroup 36 33,782.81 34.98 23 21,471.34 28.21

BofA Securities

26 27,867.49 28.85 15 14,699.58 19.31

Goldman Sachs 29 27,855.19 28.84 22 13,542.04 17.79

Morgan Stanley 30 26,634.05 27.58 20 15,195.12 20.13

Wells Fargo 28 22,604.52 23.40 21 15,319.57 20.13

Barclays Capital 21 18,845.28 19.51 17 12,199.42 16.03

UBS Securities

11 8,324.28 8.62 9 6,536.49 8.59

Cantor Fitzgerald

13 8,272.51 8.57 14 10,337.89 13.58

Credit Suisse 11 7,677.69 7.95 16 6,840.41 8.99

Bancroft Capital 8 7,207.64 7.46 1 796.81 1.05

Williams Securities

8 6,168.65 6.39 7 7,901.78 10.38

KeyBanc Capital Markets

8 5,601.18 5.80 6 5,147.74 6.76

Natixis 10 5,091.42 5.27 19 8,597.09 11.30

CIBC World Markets

5 3,979.20 4.12 6 4,592.77 6.03

CastleOak Securities

3 2,380.04 2.46 0 0.00 0.00

Jefferies 3 2,279.91 2.36 1 1,006.10 1.32

Siebert Williams Shank

1 1,139.15 1.18 0 0.00 0.00

MUFG Securities

1 811.12 0.84 0 0.00 0.00

Brean Capital 1 682.67 0.71 0 0.00 0.00

Performance Trust Capital

1 399.20 0.41 1 132.30 0.17

Mischler Financial Group

0 0.00 0.00 2 1,924.84 2.53

*Full credit to every manager on a deal. Source: Commercial Real Estate Direct


THAN K YOU TO OU R SPON SORS

C-III Capital Partners

PA RTN E R S P O N SO R

S U STA I N I N G S P O N SO R S

G O LD S P O N SO R S

S I LV E R S P O N SO R S

P L ATI N U M S P O N SO R S

B RO N Z E S P O N SO R S

M E D I A S P O N SO R S



Rialto Wins Back B-Piece Crown; KKR Keeps Top Spot Among Risk Retainers

By Orest Mandzy

Rialto Capital Advisors last year bought the B-pieces, or most

subordinate bonds, of a dozen CMBS conduit transactions with a total balance of $11.7 billion, bumping KKR Real Estate Credit from the top spot in a ranking of B-piece buyers.

KKR acquired 10 B-pieces of deals totaling $9.3 billion. But the company took top honors in a ranking of buyers of horizontal risk-retention pieces of CMBS conduit deals. It bought $755 million of bonds from 10 deals, or 31 percent of all conduit horizontal risk-retention pieces.

While the horizontal risk-retention piece of a conduit deal typically comprises its B-piece, some transactions are structured with vertical or a hybrid risk-retention scheme, which combines both a vertical and horizontal piece. In those cases, the buyer of the B-piece is free to leverage some of its investment—the piece not subject to the risk-retention rules—hedge it or sell it.

Rialto, meanwhile, was well behind KKR in a ranking of buyers of horizontal risk-retention pieces, with a 16.3 percent share of that market.

Six of KKR's deals had a horizontal structure and the remainder had a hybrid structure, which became extremely popular in the fourth quarter. Of the 17 conduits that priced during the final three months of the year, 12, or 71 percent of the deal total had hybrid structures, two had horizontal structures and three had vertical structures. In contrast, for the full year, 24 deals, or 46 percent of the year's total, had hybrid structures.

Risk-retention rules, adopted in 2016, require issuers to keep a 5 percent piece of every CMBS deal, either through a vertical or horizontal scheme, or a combination of the two. If a vertical structure is picked, the issuer retains 5 percent of every bond class, by face value. Issuers can also adopt a horizontal structure, selling off the bottom 5 percent of a deal, by market value, to a third party. Or they can combine the two strategies.

Typical CMBS conduit deals have 80 percent of their bonds rated AAA, which means retainers of vertical slices aren't retaining quite the same level of risk as those retaining

horizontal slices.The hybrid risk-retention structure became the most popular

in the conduit world last year, with 24 deals totaling $23.2 billion. The remaining deals were structured nearly equally with horizontal or vertical schemes.

On the single-borrower side, the vertical scheme remains the most popular, by number of deals. But because of a few massive transactions that had a horizontal structure, the horizontal scheme was adopted for 57.2 percent of the year's single-borrower issuance.

Most-Active CMBS B-Piece Buyers

Buyers of CMBS Conduit Horizontal Risk-Retention Pieces


2019 2018

Buyer #Deals Vol $mln

Mkt Shr%

#Deals Vol $mln

Mkt Shr%

Rialto Capital Advisors 12.00 11,732.23 23.87 10.00 8,618.51 21.47

KKR Real Estate Credit 10.00 9,286.49 18.89 10.00 8,762.05 21.82

Eightfold Real Estate Capital 7.35 7,714.70 15.69 4.00 4,107.41 10.23

Prime Finance 7.15 6,640.07 13.51 3.00 2,366.14 5.89

LNR Securities 3.75 3,560.19 7.24 2.50 2,147.04 5.35

Argentic Securities 4.00 3,181.30 6.47 7.00 5,776.44 14.39

LoanCore Capital 3.00 2,279.91 4.64 1.00 1,006.08 2.51

Ellington Management 1.75 1,826.92 3.72 1.00 901.17 2.24

3650 REIT 2.00 1,629.67 3.32 0.00 0.00 0.00

Seer Capital 1.00 1,302.47 2.65 0.00 0.00 0.00

Barings 0.00 0.00 0.00 3.00 3,714.51 9.25

Torchlight Investors 0.00 0.00 0.00 2.00 2,231.34 5.56

Stream Asset Management 0.00 0.00 0.00 0.50 520.57 1.30

Total 52.00 49,153.96 44.00 40,151.26

2019 2018

Investor # Deals Vol mln$

Mkt Shr%

# Deals

Vol mln$

Mkt Shr%

KKR Real Estate Credit 10.00 755.03 31.09 10.00 770.20 30.00

Rialto Capital Advisors 8.00 395.70 16.29 7.00 425.68 16.58

Argentic Securities 4.00 308.45 12.70 7.00 537.45 20.93

Eightfold Real Estate Capital 4.35 230.16 9.48 2.00 98.38 3.83

Prime Finance 2.65 204.50 8.42 3.00 232.19 9.04

LoanCore Caital 3.00 188.97 7.78 1.00 97.29 3.79

Starwood 5.00 175.71 7.24 2.00 54.79 2.13

3650 REIT 2.00 169.95 7.00 0.00 0.00 0.00

Barings 0.00 0.00 0.00 3.00 351.35 13.69

Total 39.00 2,428.47 35.00 2,567.33



Trustee Ranking - 2019


Total Conduit Single-Borrower 2018

Trustee #Deals Vol $mln

Mkt Shr%

#Deals Vol $mln

Mkt Shr%

#Deals Vol $mln

Mkt Shr%

#Deals Vol $mln

Mkt Shr%

Wells Fargo Bank 79 47,040.29 49.25 24 21,665.50 44.08 55 25,374.79 54.74 39 23,422.90 30.77

Wilmington Trust 52 44,979.73 47.09 26 25,897.55 52.69 26 19,082.18 41.17 70 49,681.29 65.27

Citibank 3 2,540.91 2.66 2 1,590.91 3.24 1 950.00 2.05 0 0.00 0.00

USBank 2 948.07 0.99 2 948.07 2.05 12 3,006.66 3.95

Total 95,509.00 49,153.96 46,355.04 121 76,110.85

Horizontal Vertical Total

Risk Retainer #Deals Amt $mln #Deals Amt $mln #Deals Amt $mln

KKR Real Estate Credit 13.00 844.78 13.00 844.78

Prima Capital 7.00 488.60 7.00 488.60

Rialto Capital Advisors 8.00 395.70 0.64 29.97 8.64 425.67

Argentic Real Estate Finance 4.00 308.45 4.00 308.45

Morgan Stanley 9.20 307.77 9.20 307.77

Bank of America 8.03 271.84 8.03 271.84

Wells Fargo Bank 5.81 240.80 5.81 240.80

Eightfold Real Estate Capital 4.35 230.05 4.35 230.05

Deutsche Bank 6.90 212.57 6.90 212.57

Prime Finance 2.65 204.50 2.65 204.50

LoanCore Capital 3.00 188.97 3.00 188.97

Oaktree Capital Management 4.00 181.95 4.00 181.95

LNR Securities 5.00 175.71 5.00 175.71

3650 REIT 2.00 169.95 2.00 169.95

KSL Capital Partners 3.00 156.75 3.00 156.75

Citigroup 6.34 145.67 6.34 145.67

Canada Pension Plan Investment Board 2.00 121.25 2.00 121.25

Goldman Sachs 5.08 99.65 5.08 99.65

JPMorgan Chase Bank 2.00 31.37 3.70 54.97 5.70 86.34

ReadyCap 2.00 84.78 2.00 84.78

Natixis 5.80 71.33 5.80 71.33

Apollo Commercial Real Estate Finance 2.00 68.21 2.00 68.21

Blackrock 2.00 65.00 2.00 65.00

Barclays Capital 3.35 62.65 3.35 62.65

Shelter Growth Capital Partners 3.00 51.51 3.00 51.51

Western Asset Management 1.00 45.30 1.00 45.30

Societe Generale 3.50 38.61 3.50 38.61

Blackstone Group 1.00 30.00 1.00 30.00

DoubleLine Capital 2.00 20.56 2.00 20.56

KeyCorp 2.50 16.44 2.50 16.44

Square Mile Capital Management 1.00 15.25 1.00 15.25

Credit Suisse 1.00 14.75 1.00 14.75

BMO 0.20 2.14 0.20 2.14

Most Active Retainers of Risk in CMBS Deals - 2019




Special Servicer Ranking - 2019


Master Servicer Ranking - 2019



Servicer #Deals Vol$mln

Mkt Shr%

#Deals Vol $mln

Mkt Shr%

#Deals Vol $mln

Mkt Shr%

#Deals Vol$mln

Mkt Shr%

Midland Loan Services

33 25,058.45 26.49 21 19,185.63 39.03 12 5,872.82 12.93 19 15,612.25 20.51

SitusAMC 20 13,566.60 14.34 20 13,566.60 29.86 1 362.57 0.48

KeyBank 26 12,958.54 13.70 5 5,267.87 10.72 21 7,690.67 16.93 18 9,944.40 13.07

LNR Partners 14 12,651.23 13.37 12 11,287.03 22.96 2 1,364.20 3.00 18 12,669.49 16.65

Rialto Capital Advisors

13 12,122.23 12.82 12 11,732.23 23.87 1 390.00 0.86 11 8,993.51 11.82

Aegon USA Realty Advisors

6 7,795.10 8.24 0.00 6 7,795.10 17.16 20 10,692.99 14.05

CWCapital Asset Management

11 4,977.46 5.26 1 951.71 1.94 10 4,025.75 8.86 7 6,937.51 9.12

Trimont Real Estate

Advisors

7 3,174.90 3.36 0.00 7 3,174.90 6.99 3 1,374.50 1.81

Wells Fargo Bank 1 950.00 1.00 0.00 1 950.00 2.09 18 6,381.99 8.39

C-III Asset Management

1 729.48 0.77 1 729.48 1.48 0.00 0 0.00 0.00

Cohen Financial

1 305.00 0.32 0.00 1 305.00 0.67 3 510.30 0.67

Berkadia 1 300.00 0.32 0.00 1 300.00 0.66 0 0.00 0.00

Torchlight Loan Services

0 0.00 0.00 0.00 0.00 3 2,631.34 3.46

Total 134 94,589.00 52 49,153.96 82 45,435.04 121 76,110.85


Servicer #Deals Vol $mln

Mkt Shr%

#Deals Vol $mln

Mkt Shr%

#Deals Vol $mln

Mkt Shr%

#Deals Vol $mln

Mkt Shr%

KeyBank 53 33,295.00 35.09 4 3,848.23 7.83 49 29,446.77 64.39 32.00 19,199.69 25.23

Wells Fargo Bank 39 31,197.71 32.88 23 22,345.01 45.46 16 8,852.70 19.36 65.00 40,545.45 53.27

Midland Loan Services 43 30,391.29 32.03 25 22,960.72 46.71 18 7,430.57 16.25 24.00 16,365.71 21.50

Total 135 94,884.00 52 49,153.96 45,730.04 121.00 76,110.85

RAISING THE BAR FOR MONTHLY CMBS SURVEILLANCE

KCP’s ongoing effort to enhance its service yielded a number of notable improvements this year, including:

Integration with INTEXcalc

Expanded Integration with Trepp

Alert and Notification Functionality

Advanced Search and Property Mapping

Monthly Loss Lookback Analysis

Enhanced Loan & Property Screens

Timely and Impactful Exposure Publications

Visit kcp.kbra.com for a FREE trial!



Top Bookrunners of CRE CLOs - 2019

2019 2018

Investment Bank Credit Bal $mln

#Deals Mkt Shr%

Credit Bal $mln

#Deals Mkt Shr%

Wells Fargo Securities 8.54 5,879.46 18 30.56 10.92 5,989.36 17 42.31

JPMorgan Securities 7.34 4,335.38 13 22.53 8.25 3951.98 13 27.92

Goldman Sachs 3.86 2,662.72 11 13.84 1.75 1115.47 5 7.88

Morgan Stanley 2.28 1,870.75 7 9.72 2.08 1491.55 6 10.54

Barclays Capital 2.03 1,190.71 5 6.19 0.00 0.00 0 0.00

Citigroup 1.12 1,026.97 4 5.34 0.33 116.55 1 0.82

Credit Suisse 1.33 1,022.91 3 5.32 0.50 305 1 2.15

Deutsche Bank 1.50 480.42 2 2.50 0.50 139.14 1 0.98

Bank of America Securities 0.33 366.30 1 1.90 0.00 0.00 0 0.00

Nomura Securities 0.33 206.25 1 1.07 0.00 0.00 0 0.00

UBS Securities 0.33 199.80 1 1.04 0.00 0.00 0 0.00

Natixis 0.00 0.00 0 0.00 1.00 600.00 1 4.24

Jefferies 0.00 0.00 0 0.00 0.33 350.62 1 2.48

Hunt Financial 0.00 0.00 0 0.00 0.33 94.91 1 0.67

Total 29.00 19,241.67 26.00 14,154.58



Rating Agency Ranking - 2019



Certficate Administrator

#Deals Vol $mln

Mkt Shr%

#Deals Vol $mln

Mkt Shr%

#Deals Vol $mln

Mkt Shr%

#Deals Vol $mln

Mkt Shr%

Wells Fargo Bank 115 75,035.07 78.56 45 41,772.58 84.98 70 33,262.49 71.76 98 62,378.66 82.35

Citibank 19 19,525.86 20.44 7 7,381.38 15.02 12 12,144.48 26.20 11 10,730.69 14.17

USBank 2 948.07 0.99 2 948.07 2.05 11 2,636.50 3.48

Total 95,509.00 49,153.96 46,355.04 75,745.85

Most Active CMBS Certificate Administrators - 2019


Total Conduit Single-Borrower CLOs 2018

#Deals Vol $mln

Mkt Shr%

#Deals Vol $mln

Mkt Shr%

#Deals Vol $mln

Mkt Shr%

#Deals Vol $mln

Mkt Shr%

#Deals Vol$mln

Mkt Shr%

Moody’s 78 57,424.55 49.51 17 13,696.82 27.87 35 26,330.86 56.80 26 17,396.87 90.41 65 43,752.48 48.47

Fitch 65 54,632.42 47.10 51 47,738.74 97.12 14 6,893.68 14.87 0 0.00 0.00 63 49,795.62 55.17

Kroll 66 52,502.82 45.27 35 31,700.64 64.49 18 12,505.93 26.98 13 8,296.25 43.12 57 40,508.15 44.88

S&P 65 46,804.45 40.35 35 34,166.62 69.51 30 12,637.83 27.26 0 0.00 0.00 54 32,929.03 36.48

DBRS 38 29,363.74 25.32 14 13,694.83 27.86 10 5,899.98 12.73 14 9,768.93 50.77 40 27,770.01 30.76

Morningstar 29 21,644.18 18.66 4 4,140.97 8.42 24 17,049.50 36.78 1 453.71 2.36 18 10,818.75 11.99

Total 115,982.17 49,153.96 46,355.04 19,241.67 90,265.43


CREW New York Holds Second UCREW Event for College Students at Trepp Rockefeller Center Offices


CREW New York’s Career Advancement Committee hosted its second UCREW program at Trepp, LLC. Students attended from several universities, including Harvard, Columbia, Baruch College, NYU and Fordham.

The day consisted of two panel discussions, a university etiquette talk and a networking session, where students were paired up with CREWNY members, all of whom are seasoned professionals from a variety of real estate fields. Another highlight for many was the complimentary professional photo taken for their résumés and LinkedIn profiles, which was sponsored by CREW New York.

Thank you to the CREW New York members who took time out of their schedule to take part in the program and engage with the students. The feedback we received was extremely positive, and the students thought it was an innovative event from other events they have attended.

Students gather with CREWNY mentors Annemarie DiCola, CEO, Trepp, LLC; Wendy Berger, Partner, Cole Schotz; Erin Timko, Director, Academic and Industry Relations, Trepp, LLC; Kenne Shepherd, Kenne Shepherd Interior Design Architecture; Wendy

Rossi, Senior Project Manager, Akerman LLP; and Maria Elefante, Senior Vice President, Treasury, Arbor Realty Trust, Inc.


CREWNY.org | Trepp.com



The volume of loans in special servicing totaled $12.43 billion as of last month. That compares to $17.92 billion a year earlier.Special servicing volume peaked in September 2010 at $89.9 billion, or 13 percent of the then outstanding CMBS universe.

The Data Digest

Last year, an average of $608.7 million of CMBS loans defaulted monthly. That was up from the $476.9 million average in 2018, and compares with 2017's monthly average of $1.4 billion and the $4.6 billion monthly average in 2010.

The CMBS delinquency rate last year continued its downward trajectory. The rate stood at 2.34 percent as of November, down a full percentage point from the same time in 2018. But every delinquency category saw an increase in volume, except for loans in foreclosure or REO. Volume in that category declined by 34 percent from last year to $8.5 billion.

A total of $28.2 billion, or 29.2 percent of last year's CMBS loan volume was backed by office properties. Another 17.6 percent was backed by hotels. Industrial properties backed 12.5 percent of the year's volume, while apartment properties backed 12.4 percent.

Special Servicer Volume

Monthly New Defaults

Delinquency Breakdown

2019 CMBS Issuance by Property Type

Source: Trepp LLC

Source: Trepp LLC

Source: Trepp LLC

Source: Trepp LLC


Delinquencies by State and Region

Delinquencies by Region

Source: Trepp LLC

Source: Trepp LLC


Joe McBridehead of cre finance

Trepp LLC [email protected]

Manus Clancysenior managing director

Trepp [email protected]

Orest Mandzymanaging editor

[email protected]

Dan Moynihan editor/year-end designer

[email protected]

MEET THE TEAM

Catherine Liuresearch associate


Tim CaseyStaff Writer

[email protected]

Jim BoyleStaff Writer

[email protected]

Jyoti Yadavresearch analyst



JLL origination rankings

#1 Total Loan Originations

#1 Insurance Company Originator

#1 Originator for Third Parties

#1 Total Direct Originations

#1 REITs, Mortgage REITs, Investment Funds Originator

#1 Retail Intermediary

#1 Industrial Intermediary

#1 First Lien Intermediary

#1 Seconds/Mezzanine/Preferred Equity Structures

us.jll.com/capitalmarkets Sources: Mortgage Bankers Association 2018 Rankings. Industry rankings for Holliday Fenoglio Fowler LP and its affiliates prior to being acquired by JLL on July 1, 2019.*Deal secured by Holliday Fenoglio Fowler LP or Holliday GP Corp. (“HFF”) prior to being acquired by JLL on July 1, 2019. HFF is now part of JLL.Jones Lang LaSalle Americas, Inc. is a real estate broker licensed with the California Department of Real Estate. License #01223413.

© 2020 Jones Lang LaSalle IP, Inc. All rights reserved.

Pasadena Collection*Pasadena, CAOfficeSale: $193,000,000 | Financing: $160,000,000

Indigo Palms*Phoenix, AZMulti-housingSale: $75,000,000 | Financing: $57,200,000

GreenStreet*Houston, TXRetail/OfficeFinancing: $140,000,000

Elliott Bay Dialysis PortfolioVarious locations, U.S.Medical OfficeSale: $142,900,000

Tourist PlazaOrlando, FLRetailSale: $20,500,000

Palette at Arts District*Washington, DCMulti-housingSale: $58,850,000 | Financing: $45,900,000

1407 Broadway*New York, NYOfficeFinancing: $350,000,000

Inland Empire Distribution CenterRancho Cucamonga, CAIndustrialFinancing: $200,000,000

LEADERcapitalmarkets

Trepp delivers the timeliness, accuracy and breadth of information to help clients make better decisions.

TREPP.COM | 212.754.1010

THE INDUSTRY STANDARDFOR RESEARCH, DATA AND ANALYTICS

the year˙end - trepp year end 2019.pdfboston 2.0 orange county, calif. 1.9 top coworking markets...

Documents