Citi Expects Revival of Euro New-Issue CMBS in 2013


In a report released this morning, Ciitgroup Global Markets analysts said they projected that the European CMBS market will witness a revival in 2013.

They estimated that €8 billion of new-issue European CMBS supply will come forth next year, which is a 116% rise "off a very low base," analysts said.

According to Citi analysts, the favorable funding costs, investor demand, a large need for refinancing, and new guidelines for best practice should all together help drive a rise in new supply for next year.

Meanwhile, currrent year-to-date totals in European CMBS placed issuance at €3.7 billion, according to analysts.

They projected that roughly 38% of the €20.6 billion of CMBS loans maturing next year are refinanceable, which is based on the firm's conservative underwriting assumptions. These covers a low LTV of 65% or less and a high DSCR of 1.6 times or more, Citi said. Analysts anticipate that the majority of these eligible loans will refinance via the CMBS market because of their conservative characteristics.

Citi analysts also said that CMBS spreads have rallied and current margins are less than lending margins. This is why they offer attractive new-issue economics.

Analysts reiterated that the cost of issuing CMBS is roughly 19% to 33% cheaper versus the current average commercial lending margin of about 350 basis points based on their calculations.


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