UK: Stop Press - CMBS Is Trendy

Following the onset of the financial crisis in 2007, any mention of 'commercial mortgage backed securities' or 'CMBS' was regarded as a dirty word and at one point the term was destined to face certain extinction.  Seven years on, several issuances later and following a prolonged upswing in financial market sentiment, not only is the term CMBS back in favour but it is also positively trending.  The upcoming issuance of £750 million of CMBS notes secured by the Westfield Stratford City shopping centre will not only be a defining point for CMBS issuance in 2014, but can also be considered a key step forward towards the re-establishment of CMBS as an essential funding tool for commercial real estate (CRE).

At the end of 2013, many commentators were estimating that CMBS issuance for 2014 would be in the realm of €10-15 billion.  Assuming that Deutsche Bank and Credit Agricole CIB can successfully launch the Westfield transaction, then CMBS issuance for 2014 will sit at just under €11 billion and therefore exceed the lower realm of this €10-15 billion estimate.  As industry participants head off on their summer breaks, there should be a level of euphoria that the CRE industry will have already surpassed the total issuance for 2013 (€8.7 billion) with  a number of months of the year still to run.  With rumours of further deals in the pipeline, there is every chance that 2014 could be regarded as a bumper year for the CMBS asset class.

Although the numbers are encouraging and certainly demonstrate that CMBS has a seat at the European CRE financing table, one of the most striking things about the re-emergence of a European CMBS market has got to be the dominance of various trends, which at times have dwarfed some of the more compelling stories in the market.

Following Deutsche Bank's €754 million Florentia multifamily issuance at the end of 2012, multifamily transactions came to dominate in 2013, with mega issuances by issuers such as Taurus 2013-1's €1 billion note issue and GRF 2013-1's €4.3 billion note issue. Although these deals have given the CMBS asset class a much needed boost, on account of the fact that the payment streams for such notes primarily stem from individuals funding their private residences, the classification of such properties as true commercial real estate has always been questionable.

Against the backdrop of multifamily transactions, there were two CMBS issuances that can be regarded as hugely significant as they ushered in a new era for CMBS 2.0.  Firstly, there was the eagerly awaited Debussy transaction, a CMBS secured by a number of Toys r'Us stores with a CMBS structure that is notable for containing a number of industry firsts.  However the most significant feature of the Debussy structure is that it in effect created a blueprint by which shadow banks, such as investment funds, can provide CRE bridge financing to a borrower and then exit this position through the issuance of CMBS notes.  The other noteworthy transaction for 2013 was Goldman Sachs widening the CMBS 2.0 geographical net with the issuance by Gallerie 2013 srl of €363 million CMBS notes secured by Italian retail property.  A primary driver for such an issuance was attributable to the fact that domestic regulations in Italy require institutions purchasing syndicated loans to have a banking licence, CMBS overcomes this restriction and provides a financing tool which expands the potential universe of investors.

Off the back of the Gallerie 2013 srl issue, the Italian CMBS trend continued into 2014 with the issuance of €355 million notes by Deco 2014 – Gondola and €198.2 million notes issued by Moda 2014 Srl.  Although maybe not the highest profile deal of the year, but certainly one of the more exciting developments in the industry, has been the issuance by Taurus 2014-1 of £211,500 of CMBS notes secured by properties that have been acquired through the enforcement of defaulted loans.  As a result of the Taurus deal, the market has given a clear nod to the CRE finance industry that CMBS should not be confined to prime commercial real estate.  In stark contrast, with the imminent issuance of the £750 million Westfield CMBS notes, the market has also shown that there is also appetite for mega issuances of CMBS paper secured by a single prime retail property.

Given the lumpy nature of the market, it is difficult to put too much emphasis on the presence of the multifamily and Italian trends however given that there can be said to be trends at all, then this has to be regarded as an industry positive.  At the height of the financial crisis, the CMBS product was subject to intense scrutiny and its role (if any) in financing European commercial real estate was frequently questioned with many commentators reaching the view that CMBS as a funding tool would only ever be used to fund core real estate in prime locations.  Transactions such as those mentioned above clearly demonstrate that not only is the CMBS term not extinct but that CMBS is a versatile funding tool that has a greater role to play for financing commercial real estate than many commentators first predicted or in some cases ever hoped for.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.