Commercial mortgage securitisation market dries up in wake of global uncertainty: Standard Poor’s

The Australian commercial mortgage-backed securities (CMBS) market has completely dried up in 2012, according to Standard & Poor’s latest CMBS market watch report.

There were no new tranches of commercial mortgages issued to institutional investors in the first half of the year, and S&P does not expect any commercial mortgage-backed securities (CMBS) offerings to be launched for the remainder of 2012.

As the chart below shows, the CMBS market peaked at $5 billion in 2006, but has declined sharply since then in the wake of the GFC.

S&P expects a quiet start to 2013 for the CMBS market.

“Approximately $1.92 billion of Australian CMBS and credit lease-backed notes remain outstanding as of June 30, 2012, compared with $2.04 billion in the six months ended December 31, 2011.

“The decline coincides with a flat period for CMBS issuance, amid persistent uncertainty in global markets,” says S&P.

Issuing CMBS is an alternative way of raising funds to a traditional loan through a lender with both local and offshore investors able to participate.

In a commercial securitisation arrangement, loans secured against commercial properties are bundled together and sold as debt securities to institutional investors.

Recent issuers of CMBS (prior to the drying up of the market) include Charter Hall Retail and Colonial First State Capital Management.