It's all cupcakes and unicorns in CMBS

CMBX.4.AMs are at 82, up from 76 at the start of the year, and CMBX.4.AJs are at 67, up from 57 at the start of the year.

Issuance Is Ramping Up:

Deutsche Bank will sell about $941 million in commercial mortgage-backed securities this week, kicking off a busy period for a market that may be confronting new headwinds.

It's part of the more than $6 billion in new issues that are coming as investors are beginning to question the market's ability to sustain gains won since November, analysts said. In addition to the impact of supply, growing speculation of Middle East unrest and lingering unease over the lasting power of a Greece bailout have made investors wary.

Freddie is talking their 10year from the latest K series (FREMF 2012-K17) at +63.

One of the TOP stories this morning on Bloomberg was "Manhattan Lures REITs Capitalizing on Soaring Rents: Mortgages"

Pretty much everything is going great until that girl with the tattoos bends you over the counter and rams a cupcake up your pachooka. All us guys thought y'all were getting into your scivvies to have a friendly cupcake fight followed by some light oil wrestling, then the wild one had to get all jammed up and take it in a totally different direction. We're not entirely disappointed in the outcome, but do expect some basic rules of sportsmanship to be adhered to.

I'm still of the opinion that the girl with all the tattoos is about to try to ram something up my pachooka when I least expect it. I'm not totally adverse to the idea, but don't bother calling to sell me bonds today.

Come See the Softer Side of Sears

The WSJ reports that yesterday (I totally missed it) Big Ed announced they'd jettison the real estate - a drunk hobo nearby reportedly overheard him say, "If only I had thought of this 6 years ago!".

Sears is selling 11 stores to General Growth Properties Inc., the company that owns the malls they anchor, for $270 million. Sears also intends to raise $400 million to $500 million through a rights offering, spinning off a company that will control roughly 1,250 small but profitable franchised stores that sell Sears products.

For the remaining 2,000-ish stores:

executives offered few new specifics about their plans for Sears over the next couple of years, reiterating their intention to use technology to revive the fortunes of the more than 2,000 remaining Sears and Kmart stores.

Phew, technology will save them. Glad they covered that one /end sarcasm.

They also are verbally stating that a Land's End sale is not off the table, the one piece of the pie that my wife is convinced has any value at all (she bought me a nice sweater and button up shirt from Land's End for Valentine's Day, reaffirming that we are, in fact, old and prudish). I like the real estate play - there is value there - but the timing is off.

Blackstone raises $10 billion in 7th Real Estate Fund

The wsj reports.

Blackstone Group LP has raised more than $10 billion in less than a year for its latest real-estate fund and is looking to raise an additional $2 billion by year's end

...

This time around, Blackstone was able to raise the amount in less than a year—and about $4 billion since January—a faster pace than the previous fund, these people said. A second closing for the fund is expected next week.

The IO Abbatoir

As we noted in December, Moody's decided to catch up to the rest of the rating agencies (who did the same thing 2 and 3 years ago) and the rest of the market, which apparently understood IOs eons before the rating agencies by publishing a new opinion and methodology piece and downgrading 530 IOs (almost all were WAC IOs).

If you missed the Moody's report, Nomura published a great paper this morning that sums it up neatly in 2 pages.

[sarcasm>The WSJ has been closely following the coming WAVE of downgrades, so we look forward to their coming article on the subject.

Happy Mardi Gras?

Another Mardi Gras spent in a city where no one appreciates the fine holiday. No king cake, no go home early so you can go to a ball, no laissez les bons temps rouler comments, not even a come into work the next day hungover with blurry images of bared breasts etched into my memory from the night before. Come in to work today, and not even a single black ashen crossed forehead or hungover bleary-eye in the entire work krewe - no sinners OR saints. No joie de vivre at all, in fact.

After pouting about missing out on the best holiday ever (followed closely by Halloween), I realized that the worst part of it is that I married into an acadian family with roots in Abbeville LA. I am the one that should that should be introducing the yankees that surround me to this glorious celebration. This is all my fault! I am to blame for their boring lives the past couple of weeks! I have met the enemy, and he is us.

It's actually very depressing, and I'm planning to spend most of Friday at this fine establishment where I can drown my sorrows:

Abercrombie & Fitch Thinning the Herd

TrafficCourt posted that Abercrombie & Fitch were shuttering approximately 180 stores representing 18% of its total US store count by 2015.

CRE Prices in 2017?

CREConsole posted a summary and links to the full report here.

Empire State Realty Trust IPO announced

Apparently the rumors are true. Bloomberg reported this morning that a $1 billion IPO for Empire State Realty Trust was announced that would "consolidate a group of closely held companies" (Empire State Building Associates, 60 East 42nd St Associates, and 250 West 57th St Associates) with Malkin Holdings LLC as the supervisor. Bank of Amerrilwide and Goldman are the co-leads.

Sears for sale?

There are so many options with Sears headlines: The Good Life at a Great Price. Guaranteed. Come See the Softer Side of Sears, Blue Light Special, etc.

Anyway, we noticed over in Traffic Court that there are purportedly "rumors" going around that it is for sale...

Whoever buys Sears would likely do so for the value of its real estate rather than for the value of its retail brand, given that the company owns properties in many of the nation’s oldest and best malls.

Improvements in Multifamily sector driven by NYC MSA

Herschmeyer at Co-Star notes:

Removing these loans [see list below] reduces the multifamily Fitch Loan Delinquency Index from 14.4% to 9.3% at the end of 2011. This moves multifamily from the worst performing of the five asset classes to the middle of the range with office (6.8%) and retail (6.9%) being the best performers and hotel (12.0%) and industrial (10.25%) being the worst.

In 2006 and 2007, issuers underwrote fixed-rate multifamily loans with stabilization plans, whereby rent stabilized units were converted to market. These loans, Stuyvesant Town/Peter Cooper Village ($2.8 billion), The Belnord ($375 million), Riverton ($225 million), and Savoy Park ($210 million) for a total of $3.6 billion did not see their stabilization plans pan out.

I might add to that last paragraph, "because each of the aforementioned projects were blatantly attempting to evade taxes, break NY state law, and all had ludicrous plans based on the expectation that they could simply kick out the rent control tenants and replace them with market rents - a strategy that has parted fools with their money for nearly a century". But I wasn't consulted, so I'll keep my thoughts to myself.

Delhaize Closures (aka Food Lion, Bloom and Bottom Dollar)

The WSJ reported nearly 3 weeks ago that Delhaize was closing stores, and made a great little list (see link), which I fully intended to go through and match up to grocery-anchored strip centers in CMBS deals. Also, the folks over at CRE Console put together a nice little map.

Life got in the way of my plans and I never got around to it. If you have a good CMBS exposure list, please send it over and I will append my quick cursory search results below. PLEASE NOTE that the results below are only matched on city name and partial street address match - so, if their list says the city is New York, and the loan file says Brooklyn, then it's not include. Also, if the both places list New York but one says 123 Apple Street NW and the other says 123 Apple Street SE, then it is erroneously considered a match here.


I retrieved 10 potential matches on the first run out of a total of 590 CMBS properties with Delhaize, Food Lion, Bloom, or Bottom Dollar in the name.

Property Name	Deal
Weaverville Plaza	NASC 1998-D6
Belle Station	BSCMS 2002-PBW1
Northwest Commons Shopping Center	JPMCC 2002-CIB4
DeBarry Place Shopping Center	JPMCC 2004-C1
Lanier Commons Shopping Center	SBM7 2001-C1
Anchor Plaza	CGCMT 2005-C3
Cloud Springs Plaza	MLCFC 2006-1
Ashburn Town Center (A)	MSC 2004-IQ7
Ashburn Town Center (B)	MSC 2004-IQ7
Eisenhower Square	WFDB 2011-BXR

Outback Steakhouse getting refied

Fox Business? reports:

BAML and DB are going to refi the $775mm senior loan in the Bambi deal into a new $175mm mezz loan, $325mm in senior debt, and $113.2mm in equity raised from selling 68 of the 300-ish properties.

The new CMBS are being used to refinance $775.7 million of existing CMBS debt that was originated in 2007 to finance the acquisition of OSI by investors advised by Bain Capital Partners and Catterton Partners, the term sheet said.

A sale of 68 properties for about $195.5 million and $113.2 million in cash will be used to repay the existing CMBS and recapitalize the investment firm, Private Restaurant Properties.

The collateral includes Outback Steakhouse, Carrabas, Bonefish, Cheeseburger In Paradise, Fleming's Steakhouse, Roy's (WTF is this?), and Lee Roy Selmon's (RIP) restaurants and represents about 20% of BALL 2007-BMB1.

All condolences aside, one should carefully consider whether or not to include "Roy" in the title of a restaurant. It makes me think of Lloyd's Seafood where you can get all you can eat beer battered fish and onion rings for $8 - that's not necessarily a bad thing, but it is what it is.

Bank of America Plaza in Atlanta going to foreclosure sale

From Bloomberg:

Atlanta's 55-story Bank of America Plaza, the tallest tower in the Southeast, is set to be sold at an open outcry auction on the steps of the Fulton County Courthouse tomorrow after landlord BentleyForbes missed mortgage payments. It bought the skyscraper in 2006 for $436 million from Bank of America Corp. and Cousins Properties Inc. in the city's biggest property deal

Speaking of dark space...

New Issue Calendar

February - 4 deals, $2.105b. Including a Distressed Loan deal from Rialto Capital worth $200mm

March - 7 deals, $5.9b. Also one Distressed loan deal from Blackstone and Square Mile Capital.

April - 3 deals, $2.75b

Blackstone/DDR buying EPN Portfolio fka Maquarie/DDR

CMAlert reported that Blackstone and DDR partnered to buy the 46 property, 10.6mm sf, EPN Group's retail portfolio for $1.4b, assuming mortgages on most of the properties, and using 3.9mm of the sf from 15 properties to back a loan used in the acquisition.

EPN took out Macquarie's interest in Macquarie DDR Trust in April 2010, and then took out DDR's interest in 2011, and DDR (the other partner in Macquarie DDR Trust) is now partnering with Blackstone (actually, its Blackstone Real Estate Partners VII Fund) to buy all the assets. The partnership will be 95/5 in Blackstone's favor, and DDR will also own a substantial (~10%) preferred equity slice.

The shopping-center portfolio represents the bulk of the assets of the former Macquarie DDR Trust, a joint venture between Macquarie Group of Australia and DDR, a shopping-center developer in Beachwood, Ohio. In 2010, EPN acquired a majority stake in Macquarie DDR, which was renamed EDT Retail. EPN took full control a few months ago. EPN, which is based in Skokie, Ill., was formed in 2009 by Alex Berman, a former executive of General Growth Properties.

Guggenheim partnering with DB and Ladder on CMBS deal coming in February

via CMA

Astounding! Rare! May be in Jeapordy!

Big impact words used in multiple articles about loan that sells for more than it's outstanding mortgage balance:

The DJ News headline characterizes it as "rare",

CMBS Investors Get Rare Payoff On '07 Loan

DB says,

Harris Trifon, a commercial mortgage bond strategist at Deutsche Bank, characterized the sale as "astounding"

DJ states,

By actually turning a profit on the loan, which it has been trying to resolve for three years, troubled-loan specialist firm CW Capital Asset Management has demonstrated that in some cases, patience pays.

It sure does! They charged $10.6mm in fees! That is like 14.5% of the loan's balance - not only did they manage to not get sued by the CMBS trust holders, support their own weakened B-Piece position, make a great deal with BlackRock and Korman (the buyers), but they completely ripped the face off the sponsor while he was down. Awesome! Riveting!


Do you know what else is rare and astounding? The Ossabaw Island Hog. Pig roast anyone?

Freddie SPC K-705 $1.222b

Joint Bookrunners: Credit Suisse, BofA Merrill Lynch
Co-Managers: Barclays, CastleOak Securities, Jefferies, J.P. Morgan

Rating Agencies: Fitch, Moody's

Expected Principal
Class Fitch/Moody's Size ($MM) WAL (yrs) Window (mos) Price Guidance
A-1 AAA(sf)/Aaa(sf) $95.000 3.99 1-77 sw+40
A-2 AAA(sf)/Aaa(sf) $936.317 6.60 77-79 sw+55-60

Cut-off Balance: $1.222B
Collateral: 70 Loans / 70 Properties

GSMS 2012-GC6 - $808.03mm - Goldman, Citi - Priced

The first deal of the year has been priced...

Class Fitch/Mdy Size($mm) WAL(yr) Spread
A1 AAA(sf)/Aaa(sf) 65.525 2.32 S+65
A2 AAA(sf)/Aaa(sf) 82.190 4.53 S+110
A3 AAA(sf)/Aaa(sf) 570.467 9.57 S+120
A-AB AAA(sf)/Aaa(sf) 89.850 7.18 S+135

575 Lex Under Contract

Nomura and Barclays both stated this loan is under contract, pointing out that the reported sales price of $370mm is well north of the $257mm loan balance and the most recent appraisal. Nomura referenced a Bloomberg story, but I missed it.

My absence tends to fuel market rallies, based on historical evidence, so I wanted to let everyone know I'm taking off for the rest of the week. You may want to load up on bonds before the day is over.