Finance • Section 10
the CMBS delinquency rate for self-storage peaked at 3.04 percent in 2011 and continued to lower from 2013’s rate of 1.18 percent that stood at 0.41 percent in October, 2014. This is well below the CMBS aver- age of 2.98 percent. Chart 10.9 highlights the fact that self-storage has continued to enjoy a much lower de- linquency rate than all other asset classes throughout the economic rebound. Currently, self-storage is wide- ly agreed upon to be “recession-proof.” As of Q1
2014, commercial mortgage debt
outstanding was $2.55 trillion, up from $2.41 trillion in Q1 2013. Chart 10.10 shows commercial real es- tate debt outstanding by lender type at the end of Q1 2014. Continuing the trend from 2013, commercial banks lead the lending market in new originations. This intui- tively makes sense, since many banks and thrifts have cleared troubled loans off their balance sheets and are in a better position to lend again. Financing options available to self-storage owners are primarily provided by banks (both local and regional), CMBS, and insur- ance companies. Agency and GSE programs are pri- marily geared toward multi-family lending; however there is opportunity to take advantage of SBA pro- grams that are able to underwrite the real estate and associated self-storage income.
Commercial Mortgage Backed Securities CMBS (Commercial Mortgage Backed Securities) are bonds backed by commercial mortgages. A CMBS transaction involves lenders that originate loans with the explicit purpose of pool- ing them in order to sell bonds backed by the income stream from the mortgage payments. When the bonds are sold to the investor com- munity, capital is returned to the lender, who in turn is able to redeploy that capital and make more loans. In this structure, capital flows effi- ciently between borrowers, lenders and investors, and hence the name “conduit” is given to lenders using these financing approaches. CMBS
conduit lenders
are among the most aggres- sive lenders in the market, offering non-recourse loan products with five-, seven-, or 10-year fixed rates, and amortization schedules up to 30 years, often with an
8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
interest-only period during the initial term of the loan. CMBS lending trends are toward higher leverage with lenders willing
to go higher up the capital stack from 70 percent LTV in 2011 to 75 per- cent LTV in 2014. Similarly, lenders are getting more aggressive with debt yield, the net cash flow over loan proceeds. Throughout 2013, there was a common 9.5 percent debt yield minimum; in the market today, an 8.5 percent debt yield minimum is increasingly common. Rates are extremely compelling as a direct result of a historically low 10-year Treasury index and ever-compressing spreads. In 4Q 2014, rates for 10-year CMBS loans are hovering around 4.5 percen. The interest rate for CMBS loans is calculated by adding a risk spread
premium to a benchmark index known as the Swap Side offering instead of the applicable treasure bond. For example, the applicable interest rate
Chart 10.5 – Historical Delinquency Rate By Property Type
14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%
Anchored Retail MHC
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Industrial
Multifamily Regional Mall Office Self Storage Unanchored Retail Weekly Anchored Full Service Hotel Source: DBRS Limited Service Hotel
Chart 10.4 – Deliquency Rates
10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
Banks & Thrifts (90+ days)
Source: MBA Databook
CMBS (30+ days and REO)
Source: MBA Databook 2015 Self-Storage Almanac 101
1990 Q1 1991 Q1 1992 Q1 1993 Q1 1994 Q1 1995 Q1 1996 Q1 1997 Q1 1998 Q1 1999 Q1 2000 Q1 2001 Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1
1990 Q1 1991 Q1 1992 Q1 1993 Q1 1994 Q1 1995 Q1 1996 Q1 1997 Q1 1998 Q1 1999 Q1 2000 Q1 2001 Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132
