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Nearly $16 billion worth of deals are in the pipeline for September

Issuance of commercial mortgage-backed securities has increased sharply in 2017. Banks and other underwriters are on track to issue more than $16 billion of securities this month, well above the $10.7 billion that was issued in June, the previous busiest month this year. Through the end of July, $47.4 billion of deals had come to market, up from $37.9 billion during the same period last year, according to Commercial Mortgage Alert. If that trend continues, this year’s volume will easily top 2016’s full-year volume of $77.6 billion.

CMBS volume dried up in the fourth quarter of last year partly because of new rules that went into effect on Christmas Eve under the Dodd-Frank regulatory overhaul. President Obama signed the Dodd-Frank Act in 2010.

Banks and other underwriters of commercial mortgage-backed securities are on track to issue more notes in September than any other month this year, according to a trade publication that tracks the business.

Close to $16 billion worth of deals are in the pipeline for September, according to Commercial Mortgage Alert. So far this year, the top month was June, when $10.7 billion of new securities were issued, the newsletter said.

As of the end of July, deal volume had hit $47.4 billion, compared with $37.9 billion for the same period in 2016, according to Commercial Mortgage Alert. If current volume trends continue, new deals this year likely will exceed the $77.6 billion of 2016 but fall short of the $106.2 billion recorded in 2015, according to industry experts.

Volume dried up during the fourth quarter of last year partly because of new rules that went into effect on Christmas Eve under the Dodd-Frank regulatory overhaul.

Those so-called risk retention rules required issuers to keep at least 5% of the securities they create. Concerned about the added risks and costs resulting from those rules, a number of firms last year exited from the commercial mortgage-backed securities business. But the players that have remained have been able to start increasing volume.

“At the end of last year, there were a lot of folks who were saying we may not get to what we did in 2016,” said Robert Grenda, a senior vice president with Morningstar Credit Ratings LLC. “There was some real concern about risk retention.”

But underwriters have “gotten pretty comfortable” with the new rules, Mr. Grenda said. “We haven’t seen a significant impact on volume.”

The record year for new commercial mortgage-backed securities was 2007, when there were $314 billion of new issues, according to Commercial Mortgage Alert.

Source: Wall Street Journal