Friday, May 22, 2009

REIT Maturities, Dig For Fire

Despite the whipsawing we're seeing CMBS spreads, there still hasn't been the "wave of mutilation" that everyone is expecting to see in the CRE space. But fear not, "stormy weather" is coming, and it's easy enough to "gouge away" at some of the obvious points - such as REIT loan maturities in '09 and '10.

We still have about $2.3 billion in REIT CMBS maturities over the rest of 2009, and $6.5 billion in 2010. Of the total from those two years, $6.5 billion is in the Conduit universe. The plot thickens past 2010, but this is a humble blog with no revenue other than ads (that no one clicks on). Please email for further analysis and wiring details :).

There are actually some '06 vintage deals with heavy concentrations maturing in 2010 - these are 5-year loans originated in late '05. They include the Colonial Mall Glynn Place ($23mm - MLCFC 2006-1, CLP), Kenwood Town Center ($147mm - MLCFC 2006-1, GGP), and Alderwood Mall ($108.6mm - MSC 2006-T21, GGP).

Deals with heavy concentrations (>10%) of maturing REIT debt between now and end of 2010 include:

DEAL REIT Loans Mat. '09 & '10
WBCMT 2003-C8 25.5%
GMACC 2000-C3 23.1%
CCMSC 1999-C2 16.6%
MSDWC 2001-T1 13.0%
BSCMS 2000-WF2 12.9%
JPMCC 2005-LDP4 12.4%
WBCMT 2003-C9 11.6%
MLMT 2004-KEY2 10.6%
CSFB 2001-CK1 10.5%

On the one hand, you have original LTVs that are very low (between 55 and 68%), appreciation in all of these loans (even the shortest), high DSCR ratios, etc. and one would expect that these loans would have no problem refinancing in any market. On the other hand, you have the experience we just witnessed with GGP loans that also met all of those criteria. It seems the salient point in regards to the CMBS deals are the threat of extension, rather than actual losses, so you like IO and credit, and don't like short dupers on these deals.

The obvious other angle is to look at which REITs have the toughest mortgage maturity schedule. Some more work is required to fully analyze this, but a quick look and some challengeable (I might be making up a word here or there) data from Bloomberg, highlights a few names

REIT CMBS Maturing '09 and '10
GGP 2,252,552,611
DDR 548,001,132
Regency 387,626,486
SPG 374,168,033
CLP 340,774,373
Education Realty 285,103,248
Macerich 232,196,599
Extra Space 227,650,000
CBL & Assoc. 166,635,022
EPT 150,000,000
Equity Lifestyle 144,131,062
Host 135,000,000
Taubman 132,098,802
LaSalle Hotel 126,669,370
U-Store-It Trust 103,662,495

GGP is an obvious winner, but DDR has 21 properties with loans maturing over the next 18 months accounting for over 9% of their total debt outstanding, and nearly 20% of their CMBS debt outstanding. The next one in the list is Regency with $388mm maturing, over 18% of their total debt, and more than 40% of their outstanding CMBS.

Obviously there is much more to be done to really identify the right place to make a play here, but we'll post follow-ups. For what it is worth, I think the equity play is a little hard, because given what is priced into CMBS (despite the rally), equities are too rich, but all the names above are represented in the SRS ETF - probably better to short particular names though, if you're going the equity route. I think the plays are in the debt space. This is actually part 2 on Maturity Waves - see Part I, Wave of Mutiliation, published back in November 2008.

*I corrected the ticker to CLP for Colonial Properties Trust...

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