(Bloomberg) — Morgan Stanley says commercial real estate will see a so-called K-shaped recovery from the pandemic, leading to stark winners and losers among holders of commercial mortgage-backed securities.
This bifurcation means that some deals will experience much higher realized losses than others, depending on factors such as bond, vintage and property type. Bonds backed by hotels, retail and offices are likely to see more struggles than those on industrial properties.
The split creates a market where due diligence and active management is key as investors seek to gain an upper hand amid the chaos.
“A bond picker’s market has emerged,” a team of Morgan Stanley analysts led by Richard Hill wrote in an outlook report Wednesday. For instance, a “market of ‘haves’ and ‘have-nots’ has emerged in BBB- (CMBS bonds), as idiosyncratic risks and rising loss expectations magnify quality tiering.”
This has led to scant trading opportunities for older BBB- CMBS conduit tranches. Investors are unwilling to sell the higher-quality bonds, while the lower-quality bonds lack sponsorship, the analysts wrote.
The CMBS market has struggled this year as Covid-19 kept shoppers out of malls, travelers away from hotels and workers home from offices. More than 1,400 CMBS loans totaling $29.3 billion are currently delinquent, Morgan Stanley said. Lodging and retail properties have the highest delinquencies, at 22.6% and 11.8%, respectively.
To make things more complicated, the overall CMBS headline delinquency rate of 7.8% “may be understated by 300 to 400 basis points, given a combination of forbearance and borrowers drawing down on reserves to pay current principal and interest payments,” the report said.
The bank’s expected-loss projections for CMBS conduits are in an average range of 5% to 7%, depending on which year a CMBS was issued. That could exceed 10% and even hit the high teens for specific deals that are more troubled, the report said.
Losses may reach as high as the AA ratings tier in certain bear-case scenarios, the Morgan Stanley research show, while lower-ranked classes will almost definitely see some realized losses, depending on the transaction.
“There is a wide range of deal-by-deal losses across all vintages,” Hill wrote, noting that additional stresses on lodging, retail, and office properties may cause loss projections to rise.
Despite the challenging picture of performance, CMBS issuance next year may surprise to the upside. The bank projects $60 billion to $70 billion in 2021 sales across conduit, single-asset, single borrower, and commercial real estate CLO offerings as maturities come due.
CMBS sales have reached about $54.4 billion so far this year, more than 40% lower than the same span in 2019, according to data compiled by Bloomberg.
Relative Value: CLOs
- Goldman Sachs Asset Management remains constructive on senior CLO tranches, as analysts think spreads have room for further compression and offer attractive carry for a short spread duration profile, according to a recent research note
- AAA rated CLO spreads have lagged other securitized credit sectors
- “Spreads on securitized credit sectors tightened following the U.S. election and positive vaccine developments, consistent with the improvement in risk assets”
“The way special servicers look at the vaccine news is, ‘Does this make the CMBS borrowers more likely to commit new capital to protect their equity? Will they now be more apt to commit capital?’” said James Shevlin, president and chief operating officer of special servicer CWCapital. “We hope the answer is yes, as some borrowers are in round two of forbearance.”
ABS deals in the queue include Volkswagen (auto lease) and ServiceMaster Brands (whole business). The latter transaction may price on Friday. CLOs from KKR and Symphony Asset Management may also price on Friday or next week.
©2020 Bloomberg L.P.
Okanagan-Shuswap real estate markets not slowing down – Kelowna Capital News
Home sales in the Central, North Okanagan and Shuswap markets continue to soar.
According to the Okanagan Mainline Real Estate Board (OMREB), residential sales in November of this year topped last year’s sales by 71 per cent, but came in at 15 per cent less than October’s 1,062 sales.
The supply of homes, OMREB found, still struggles to meet the high demand.
“We continue to see high residential housing demand despite a mild seasonal slowdown generally seen during this time of year,” said OMREB President Kim Heizmann said in an announcement on Dec. 2.
“Looking at the numbers we can see that consumer demand is not being met due to record low listings, which creates upward pressure on pricing. Essentially, the demand is so high that is difficult for inventory to build up.”
Compared to 2019, single-family homes across the board have increased in sales and price. In November, the most homes in the region sold in the Central Okanagan, totalling 291 sales. The highest average price also rested in the Central Okanagan, at $728,900, up 10. 5 per cent from last year. The lowest prices in the region, while also climbing, are found in Shuswap/Revelstoke, at $480,600. The North Okanagan fell between the two.
It’s a similar story for townhouses, as well as condos/apartments. However, condos in Shuswap/Revelstoke are closer in price to those in the Central Okanagan, at $342,000 compared to $387,300.
The average number of days to sell single-family homes substantially decreased, by about 20 per cent across the board compared to last year.
However, compared to October, the number of days to sell all home types went up 8 per cent to 88 days.
For more information on your local real estate market, visit OMREB.com, or contact your local Realtor.
Do you have something to add to this story, or something else we should report on? Email: firstname.lastname@example.org
Record-Setting Sales Continue in November on Montreal's Real Estate Market – GlobeNewswire
L’ÎLE-DES-SŒURS, Quebec, Dec. 03, 2020 (GLOBE NEWSWIRE) — The Quebec Professional Association of Real Estate Brokers (QPAREB) has just released its residential real estate market statistics for the Montreal Census Metropolitan Area (CMA) for the month of November, based on the real estate brokers’ Centris provincial database.
A new November sales record was set in the Montreal CMA despite the second wave of the COVID-19 pandemic. Residential sales jumped by 32 per cent compared to November of last year.
“We also saw a historic 57 per cent increase in the number of new condominium listings on the Island of Montreal, the highest level since the year 2000 when the real estate brokers’ Centris system began compiling market data,” said Charles Brant, director of market analysis at the QPAREB.
- Year-to-date sales have increased by 7 per cent compared to the same period in 2019.
- Sales continued to increase in several periphery markets, including the North Shore (+48 per cent), the South Shore (+37 per cent), Laval (+34 per cent) and Vaudreuil-Soulanges (+32 per cent), as well as on the Island of Montreal (+21 per cent). In contrast, sales in Saint-Jean-sur-Richelieu slowed, registering a 3 per cent increase, due primarily to a record drop in new listings in this market over the past several quarters.
- By property category, plexes (2 to 5 dwellings) registered the largest sales increase (+34 per cent) followed closely by condominiums (+31 per cent) and single-family homes (+31 per cent).
- There was a significant increase in active listings for condominiums (+14 per cent) and plexes (+7 per cent), numbers that have not been seen for a month of November since 2012 and 2014, respectively. This was in contrast to single-family homes, which registered a sharp decline (-38 per cent).
- With market conditions that are still very much to the advantage of sellers, median prices continued to increase significantly for single-family homes (+23 per cent) but tended to slow down for condominiums and plexes (+9 per cent).
If you would like additional information from the Market Analysis Department, such as specific data or regional details on the real estate market, please write to us.
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On December 16, the QPAREB will unveil its assessment of the 2020 real estate market, along with its forecasts for 2021 and an analysis of the impact of COVID-19. A press release will be issued on November 16. Please reserve your time slot for an interview now at email@example.com.
About the Quebec Professional Association of Real Estate Brokers
The Quebec Professional Association of Real Estate Brokers (QPAREB) is a non-profit association that brings together more than 13,000 real estate brokers and agencies. It is responsible for promoting and defending their interests while taking into account the issues facing the profession and the various professional and regional realities of its members. The QPAREB is also an important player in many real estate dossiers, including the implementation of measures that promote homeownership. The Association reports on Quebec’s residential real estate market statistics, provides training, tools and services relating to real estate, and facilitates the collection, dissemination and exchange of information. The QPAREB is headquartered in Quebec City and has its administrative offices in Montreal. It has two subsidiaries: Centris Inc. and the Collège de l’immobilier du Québec. Follow its activities at qpareb.ca or via its social media pages: Facebook, LinkedIn, Twitter and Instagram.
Société Centris provides real estate industry stakeholders with access to real estate data and a wide range of technology tools. Centris tools are used by close to 14,000 real estate brokers, as well as other industry professionals. Centris also operates Centris.ca, the most visited real estate website in Quebec.
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Metro Vancouver, Fraser Valley remain a sellers' markets, say real estate groups – CBC.ca
Housing sales in Metro Vancouver fell almost 17 per cent in November compared to the previous month, according to the Real Estate Board of Greater Vancouver.
But the industry group says as trends go, demand remains high, making it a sellers’ market.
REBGV’s monthly tally shows 3,064 homes sold last month across the region, compared to 3,687 in October 2020.
Compared to November 2019, sales were up 22.7 per cent.
Colette Gerber, REBGV chair, says demand from buyers has been at “near record levels” since the summer.
“This is putting upward pressure on home prices, particularly in our detached and townhome markets,” she said.
The Sunshine Coast showed the largest increase in year-over-year sales according to the data, with Squamish and the Gulf Islands not far behind.
“The rise of work-from-home arrangements and physical distancing policies is causing some home buyers to opt for less densified areas,” said Gerber.
The total number of Metro Vancouver homes currently listed for sale is 11,118, representing a 10 per cent decrease from October 2020.
Gerber says the current market favours sellers because demand is outstripping supply.
The Multi Listing Service home price index composite benchmark price for all residential properties in Metro Vancouver — detached homes, townhomes and apartments — is $1,044,000, a 5.8 per cent increase year-over-year and a 0.1 per cent decrease compared to October 2020.
Benchmark prices in each of the three categories are:
- Detached home: $1,538,900
- Attached home: $814,800
- Apartment: $676,500
The sales scene in the Fraser Valley is even hotter, according to the Fraser Valley Real Estate Board.
It describes the level of demand as “unrelenting,” even though like Metro Vancouver, November sales dropped by 8.3 per cent from October.
In total, there were 2,173 property sales, an increase of 54.7 per cent compared to November 2019.
The boards says monthly sales records were set in September, October and November compared to previous years.
“We expected November activity to moderate due to the season, but the desire for family-sized homes and their benefits continues to dominate,” said president Chris Shields.
“Since the summer, we’ve seen the strongest demand in our board’s 99 year history, specifically for single-family detached and townhomes,”
The FVREB calculates the benchmark prices for the region as:
- Single family detached: $1,061,500
- Townhome: $570,100
- Apartment/condo: $435,900
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