Mortgage finance: The revival of European CMBS – but not as we knew it
The market is showing signs of revival, but it will be smaller and less diversified than it was at its peak.
It would be appropriate if a transaction named Taurus turns out to have triggered a sustained and bullish revival in the market for European commercial mortgage-backed securities. The €1 billion Taurus 2013 deal, led in May by Bank of America Merrill Lynch and HSBC, was certainly regarded as an important breakthrough, given that it was the first fully syndicated, publicly placed European CMBS since the financial crisis. Backed by a loan originated by BAML in February for a portfolio of 37,000 multi-family units in Dresden managed by real estate company Gagfah, each of the tranches on Taurus 2013 was oversubscribed, allowing for pricing to be tightened across the capital structure. A more testing examination of the strength of demand for European CMBS came the following month, with the launch of another Gagfah multi-family CMBS. The €2 billion German Residential Funding (GRF) deal was comfortably the largest European CMBS since the financial crisis. Although it was doubled from its planned minimum size, pricing on the most junior tranches was widened from the original guidance. Bankers who worked on the GRF CMBS say that this was principally a reflection of the timing of the deal, which was launched amid increasing misgivings about quantitative easing tapering in the US.