BOSTON—Pricing on commercial real estate loans behind CMBS increased slightly in May, DebtX said Thursday. The 20-basis point upward movement to 98.9% marked the second monthly increase in a row, breaking a pattern of up-and-down movement in CMBS whole loan prices seen since the beginning of 2017.
“The modest increase in loan prices in May was due to a decline in both the base market spreads and US Treasury yields,” says Will Mercer, managing director at DebtX. Average loan yields declined to 4.1% in May from 4.2% in April, which in turn declined from the 4.3% level posted in both February and March.
As of the end of May, DebtX priced $996 billion in commercial real estate loans that collateralize US CMBS trusts. The median adjusted loan-to-value was unchanged from April at 58%, and the median debt service coverage ratio remained at 1.52. April's DSCR represented a slight increase from March, when DebtX reported it at 1.51.
March saw whole loan prices dip to 98.1% from 98.2% at the end of February. In turn, February represented a 110-bp increase from January's 97.1%, which followed a slight decrease from 97.7% at the end of December.
All in all, CMBS loan prices were basically flat throughout 2016, DebtX said this past January. Last year, “the volatility in Treasury rates was mostly offset by tightening spreads, so the net result was a fairly stable year for loan pricing,” Mercer said at the time. One metric that has posted a steady decline since the start of 2017 has been average loan yields, which began the year at 4.4%.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
