Executive at NatWest Markets (NatWest Group plc)
- Issuance volume and market demand evolution for CMBS (commercial mortgage-backed securities)
- Typical tranche strength and pricing, looking at key risk holders in each partition
- NPE (non-performing exposures) and default developments, reading through to fragility risk areas and scenario analysis
- Private CMBS markets update and how to analyse off-balance sheet products
- Which banks hold the highest exposures to CMBS and how easily can positions be liquidated?
What are the real key drivers of property markets?
It seems that you’re more optimistic than headlines currently are – I’ve read recent articles which have said CMBS [commercial mortgage-backed securities] are the new RMBS [residential mortgage-backed security], that it’s the big short 2.0. Why would you disagree with that?
Instead of seeing 5-6 loans underlying, as you noted, are we commonly seeing in a European issuance 1-3 loans in CMBS?
How much exposure could be in each loan that is securitised away?
Do you expect to see 6-7 potential deals in 2023? How large would you expect those issuances to be?
How subscribed-for do you envisage CMBS deals being? Is there still a lot of investor interest in this?
Do you see the pricing at around 13% as being more typical, going forwards, in the CLO [collateralised loan obligation] market?
How much more debt can be warehoused by banks or other market players? How pregnant can these players become before reaching a breaking point and needing to access securitisation markets? Are there other avenues?
At the moment, there’s a lot of REITs or listed real estate companies trading below NAV [net asset value], which signals that the market is expecting some kind of large valuation declines. You’re seeing it as difficult for these companies to dispose of assets if they need to, and some have upcoming large debt maturity walls. How is that dynamic going to read through to current outstanding CMBS issuances?
Typically, how active are secondary markets for CMBS? Once these tranches have been sold off, will they generally be held to maturity?
Who are the typical holders of each tranche?
What are the typical weightings of tranches or structures? What did this look like 2-3 years ago vs coming to market today? How would one need to structure this kind of securitisation?
Where do you see pricing spreads moving for current issuances? How do these look across tranches?
How do you expect pricing spreads to develop for the lower-end parts of the capital structure throughout the next year or so?
What could be potential triggers for a downwards valuation spiral?
Which property types do you see as being most at risk? How much of those areas’ or asset types’ debt currently sits within CMBS in Europe?
How do you see further ESG requirements intersecting with various CMBS products and tranches?
Is there any risk of contagion across banks that hold CMBS?
Given the evolving commercial real estate story, do you see any refinance risks for assets? How big do you envisage maturity walls being? Given recent market outflows, could this make a bad situation worse, or a risky situation volatile?
What’s your outlook for defaults and non-performing exposures? Blackstone, Brookfield and Pimco all defaulted in the past six weeks or so. Do you see similar scenarios further playing out in Europe?
How do you see willingness to lend to commercial real estate evolving, given future market developments? Where and how is that going to change?
Is there anything you’ll be watching for that we haven’t covered regarding CMBS and this ecosystem?
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