CRE loans backing CMBS gain value, but cause alarm
The aggregate value of commercial real estate serving as collateral for commercial mortgage-backed securities rose to 86.1% in December, up from 85% a month earlier, DebtX said Tuesday. DebtX, a loan sale adviser, said that's up significantly from December 2010 when loan values for CMBS collateral remained at 79.4%. "CRE loan prices in December rose to their highest level in more than two years," said DebtX CEO Kingsley Greenland. "The price increases are the result of a decline in Treasury yields, a decrease in credit spreads and improving CRE fundamentals." Of the 51,895 CRE loans evaluated by DebtX, the firm found the debt had a total aggregate principal balance of $621.5 billion. Those loans evaluated currently collateralize 651 U.S. CMBS trusts. News of higher collateral values arrived the same day that Trepp Analytics noted an increase in CMBS spreads over swaps. The CMBS analytics firm said worries over Greek sovereign debt and bailouts sent the markets lower. Another factor impacting CMBS spreads was a report suggesting CMBS had come too far too fast, Trepp noted. The worries stemmed from a rally in the first half of January that lifted bond prices to worrisome levels, Trepp noted. Write to Kerri Panchuk.