New York, US, 17th September 2022, ZEXPRWIRE, As companies and investors move into the third quarter of the year, it is time to take a look at the commercial mortgage backed securities (CMBS) market. Commercial mortgage-backed securities (CMBS) are fixed-income investment products that are backed by mortgages on commercial properties rather than residential real estate. CMBS can provide liquidity to real estate investors and commercial lenders alike. Because there are no regulations for standardizing the structures of CMBS, their valuations can be difficult. The underlying securities of CMBS may include a number of commercial mortgages of varying terms, values, and property types—such as multi-family dwellings and commercial real estate. CMBS can offer less of a prepayment risk than residential mortgage-backed securities (RMBS), as the term on commercial mortgages is generally fixed.
As with collateralized debt obligations (CDO) and collateralized mortgage obligations (CMO) CMBS are in the form of bonds. The mortgage loans that form a single commercial mortgage-backed security act as the collateral in the event of default, with principal and interest passed on to investors. The loans are typically contained within a trust, and they are highly diversified in their terms, property types, and amounts. The underlying loans that are securitized into CMBS include loans for properties such as apartment buildings and complexes, factories, hotels, office buildings, office parks, and shopping malls, often within the same trust.
A mortgage loan is typically what is considered a non-recourse debt—any consumer or commercial debt that is secured only by collateral. In case of default, the lender may not seize any assets of the borrower beyond the collateral. Because CMBS are complex investment vehicles, they require a wide range of market participants including investors, a primary servicer, a master servicer, a special servicer, a directing certificate holder, trustees, and rating agencies. Each of these players performs a specific role to ensure that CMBS performs properly.
The CMBS market accounts for approximately 2% of the total U.S. fixed-income market. Joe Malvasio of Global Capital Partners Fund, LLC provides his insights on the current state of the market and what we can expect in the coming months. The CMBS market had a strong first half of the year, with issuance totaling $140 billion. This is up from $120 billion in the first half of 2020 and marks the highest level of issuance since 2007. The increased activity can be attributed to a number of factors, including low interest rates, strong demand from borrowers, and an increase in refinancing activity.
Looking ahead, investors can expect commercial mortgage backed securities issuance to remain strong in the third quarter as borrowers take advantage of low interest rates. There may also be some changes in the composition of issuance, with more private label deals coming to market and fewer conduit deals. This is due to the continued strong demand for higher-yielding products from investors. Overall, the CMBS market is in a good place right now. Borrowers are taking advantage of favorable conditions to refinance or purchase property, and investors are finding plenty of attractive opportunities. Investors should see another strong quarter of issuance, followed by a fourth quarter that could be even stronger.
About Joseph Malvasio, president of Global Capital Partners Fund, LLC
Joseph Malvasio is the president of Global Capital Partners Fund, LLC. Over the past 40 years, Mr. Malvasio has emerged as one of the most dependable private lenders in the United States. He has an excellent reputation for great client service, quick closing of loans, and a suite of lending options. Global Capital Partners is a private global commercial lender based in NYC, offering many financing options, including: bridge financing, hard money loans, private lending, commercial real estate financing, structured joint venture financing, permanent financing, mezzanine financing, construction loans and acquisition financing. It is recognized as one of the best mortgage lenders due to its simple loan applications and quick processing. It has been highly successful and helped many clients over the years. Global Capital Partners has funded over $2 billion in transactions. From mortgages to land, development, and even equipment, its expertise in private loan financing allows it to quickly close on loans from $1MM to over $100MM.
Disclaimer: The views, suggestions, and opinions expressed here are the sole responsibility of the experts. No Sounder Mirror journalist was involved in the writing and production of this article.