Term Sheet: Senior executives talk about a slow return of capital markets at CREFC; PIMCO logs 2023’s largest debt fundraise

Senior real estate leaders anticipate more obstacles for originations and capital markets at CREFC; PIMCO preps debt dry powder with year’s largest fundraise to date; Trepp tracks rise in delinquency and special servicing rates as CMBS market congestion builds; and more in this week's Term Sheet.

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They said it

“For lesser-quality assets, particularly in the US office market, we are seeing more evidence of things going south and lenders having to reconcile the reality of that”

Justin Curlow , global head of research and strategy at Paris-based manager AXA IM ALTS - Real Assets , told Real Estate Capital USA this week that debt problems relating to office assets are still in their early stages.

What’s new

What comes next

The global commercial real estate market has yet to come to terms with the impact of the most significant interest rate tightening cycle on record – and what that means for the sector in the coming years, according to attendees at this week’s EXPO REAL (Messe München) conference in Munich.

While the mood this year is lighter than one year ago, the market continues to be in a period of stasis in which investors have not capitulated on pricing and a wide gap remains between borrowers and lenders, attendees told Real Estate Capital USA. In the near term, market participants expect to see asset- and market-specific distress as loans come due and, over the long term, are starting to accept that the era of almost-free money is over.

Flash in the pan

The commercial real estate collateralized loan obligation sector saw a flare of activity this week with a nearly $900 million close from New York-based manager Benefit Street Partners . The Franklin Templeton affiliate closed BSPRT 2023-FL10 on September 28, marking BSP’s 10th CLO since June 2017 and the real estate market’s first multi-asset class managed CLO closed since August last year.

Michael Comparato , president of Franklin BSP Realty Trust, said the transaction gives the firm more capacity on its lines by converting a meaningful amount of warehouse liabilities to a non-recourse, non-mark-to-market liability structure.... read more

Chart-topping fundraise

PIMCO is vying for a top spot as one of the country’s largest real estate lenders after holding a $3 billion final close for its second fund focused on the sector. PIMCO Commercial Real Estate Debt Fund II is more than double the size of its 2020 predecessor and represents the single-biggest private real estate debt fund raised so far this year...read more.

Rebuilding phase

Commercial real estate capital markets have been slow to regain momentum following the Federal Reserve’s 500-plus basis points of rate hikes over the last year and senior executives speaking at New York-based trade organization CRE Finance Council ’s Capital Markets Conference this week do not expect that tune to change soon. Read more...

October/November issue live now

The latest issue of Real Estate Capital USA is live now and features a deep-dive cover story on how the US commercial real estate industry is grappling with a future filled with lower leverage than the past 15 years. The full October/November issue can be downloaded here.

Trending

Insurance stability

The ratings of US life insurance companies are not expected to see an impact from their exposure to commercial real estate mortgages, even with the potential for a mild recession in the second half of 2024, according to a report this week from Fitch Ratings . The New York-based rating agency cited diversified, high-quality portfolios, conservative underwriting and the effective management of assets and liabilities. Read more

CMBS congestion

New York-based data provider Trepp, Inc. this week tracked a rise in the commercial mortgage-backed security loan delinquency rate in August to 4.39 percent, a 14 basis-point increase from July. The uptick was attributed to a sharp increase in the office delinquency rate, which rose from 5.07 to 5.58 percent during the month. Trepp’s CMBS special servicing rate similarly rose five basis points in August to 6.67 percent, marking the seventh consecutive monthly increase.

Stav Gaon , head of securitized products research and strategy at New York-based investment bank Academy Securities , said though it is not a good sign that more CMBS loans are transferred to special servicing, it is the first step to deal with the situation and explore space for loan modifications. “It’s not surprising to see the elevated special servicing rate, the real question is: what’s next?” Gaon said, adding that... continue reading

Non-bank backing

With multifamily sponsors and owners continually seeking non-bank capital sources to refinance their assets, government agencies and insurance lenders are increasing their attention toward recapitalization efforts. Irvine, California-based multifamily investor Advanced Real Estate and San Mateo, California-based apartment investor Prometheus Real Estate Group each tapped into non-bank lenders this week. McLean, Virginia-based agency Freddie Mac provided a loan to the former and undisclosed insurance company lenders worked with the latter.

Data snapshot

Capital costs expected to rise

Commercial real estate market participants are expecting the cost of capital next year to rise and its availability expected to drop, according to Deloitte’s 2024 Commercial Real Estate Outlook. The firm, which surveyed 750 commercial real estate chief financial officers globally, also found that economic concerns will drive decision-making through the next 12-18 months. Delve into the detail...

People

TruAmerica Multifamily ’s international expansion

Los Angeles-based investment manager TruAmerica Multifamily this week added Rob Kukulka to its capital markets team as a capital markets adviser for the Middle East region.

Loan in focus

Post Brotherly love

Paris-based bank 法国兴业银行 and New York-based manager Rockwood Capital Group this week originated a $312 million refinancing package for the first phase of a mixed-use residential asset in Northern Liberties, a Philadelphia submarket. Get the full lowdown

Read the Term Sheet in full by heading over to Real Estate Capital USA...

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