– Michael Cohen, Brighton Capital Advisors
F. Scott Fitzgerald once wrote that “there are no second acts in American lives.” And while the author of The Great Gatsby might have been referring to actors, auteurs and elected officials, he clearly missed the boat when prognosticating the resilience of commercial mortgage-backed securities (CMBS).
Through the first five months of 2024, the CMBS market is not only back, but thriving.
A year after issuance of conduit CMBS — multi-asset, multi-borrower deals — declined by 27 percent on the year, and issuance of SASB CMBS — single-asset, single-borrower deals — declined a whopping 73 percent, per Commercial Real Estate Finance Council (CREFC) data last October, originations have completely reversed course.
Year-to-date 2024, U.S. private-label CMBS issuance totals $32.2 billion compared to $13 billion during the same period in 2023, according to CREFC. CMBS issuance reached $12.2 billion in the first quarter of 2024, up nearly five times from the $2.7 billion in CMBS issuance in the first quarter of 2023, according to Blackstone.
This unexpected second act coming from this small but significant corner of the capital markets board — CMBS represents 14 percent of all U.S. CRE lending — could have vast ramifications.
Especially since investors have flocked to the nebulous security product — $24.6 billion in new CMBS securities have been purchased year-to-date through May, nearly three times the amount the first five months of 2023 experienced, according to Moody’s Analytics.
“I’ve been in CMBS for 30 years, and I have borrowers who say, ‘I’ll never do this again,’ and then we’re having a closing dinner,” said Michael Cohen, managing partner of Brighton Capital Advisors, a CMBS restructuring specialist. “I say, ‘Remember 10 years ago?’ But in this marketplace it’s any port in a storm.”
Richard Fischel, Cohen’s partner at Brighton Capital Advisors, said it’s the cost of capital that has made the often-loathed financing source the weapon of choice for CRE borrowers today.
“They have short memories,” he said, laughing. “Everyone says they’ll never do a CMBS loan again, and then someone comes to them with one and they’re 25 basis point cheaper than the alternative, and they jump right back in.”…
