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Equities Enjoy Modest Post-Election Bounce, Nothin’ Much for CMBS

Forty years ago yesterday, Stevie Wonder had the number one song on the Billboard charts with “You Haven’t Done Nothin.” (Incidentally, Wonder is playing New York’s Madison Square Garden tonight.)

If you know which superstar group provided background vocals on the politically charged funk song you will be immediately inducted into the TreppWire Rock and Roll Hall of Fame.

While US stocks saw a nice little post-election bump, you could say the CMBS market didn’t do nothin’ on Wednesday. Trading volume was light and spread moves were modest for the day. Despite the lack of meaningful spreads moves, the tone of the market continued to be positive. Paraphrasing one trader, “everything feels a little tighter even though there is no specific evidence anyone can point to today.”

Now all eyes turn to Friday’s jobs report for the next clues on the state of the US economy and what the Federal Reserve Bank’s next move might be.

A: The Jackson Five


Credit Story: Another NYC MF Pro-Forma Loan in Trouble

The $170 million Parkoff Portfolio loan is now with the special servicer due to “imminent monetary default” according to a Fitch email circulated late Wednesday. Backing 13.5% of MSC 2007-HQ12, the Parkoff Portfolio consists of 312 units in six multifamily properties in the Lenox Hill and Upper East side neighborhoods of Manhattan. There is also a $30 million subordinate note held outside of the trust.

According to loan documents, the note was underwritten using “stabilized” NOI and NCF based on projections of year-five levels. The pro-forma underwritten DSCR was 1.57x while the true as-is DSCR was 0.97x. The pro-forma appraisal at securitization was $253 million, which put the aggregate A and B note LTV at 79.1%. The underwritten CMBS LTV was 67.2%. DSCR through the first six months of 2014 was 0.85x on 96% occupancy. According to watchlist comments, one of the properties is easily covering its portion of debt service, while the other five property DSCRs range from 0.64x to 0.91x. The loan is full-term, interest-only and due to mature in April 2017.

MSC 2007-HQ12 has taken about 2.9% in losses so far and carries appraisal reductions up to the originally AA rated B tranche. Considering how high Manhattan real estate values are at this point, one might expect low losses on this loan. Applying a conservative 6% cap rate to 2013’s full year NOI values, the portfolio comes in at $126.6 million. Using a more liberal 4% puts the properties at $189.9 million.

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