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CMBS Momentum Persists Into Q4, Brookfield-GGP Deal Could Benefit The Market

CMBS loan issuance continued its upward trajectory in October after the market experienced a solid third quarter.

222 Second Street, San Francisco
Tishman Speyer's 222 Second St. in San Francisco

Lenders issued 269 loans totaling $7.5B during the month, Trepp reports. Office and lodging properties dominated the list, such as the $771.8M in securities issued for Starwood Lodging Hotel’s portfolio — the second-largest CMBS loan of the month, according to Trepp data.

Properties within Northern California topped the list of the largest loans issued in October. Santa Clara’s Palo Alto Networks inked a deal for a bundle of securities totaling $310M, and San Francisco’s 222 Second St. secured $100M. The office tower is owned by New York City’s Tishman Speyer Properties, which recently acquired full ownership of the 452K SF tower for $530M, or roughly $1,200/SF. 

Another deal worth noting is Brookfield Property Partners $14.8B bid for GGP Inc. Though it remains unknown whether the unsolicited proposal will be accepted by GGP, Morningstar Credit Ratings believes the acquisition could benefit the CMBS market. 

“We see this as a generally positive development for CMBS as Brookfield may be able to leverage its expertise across various real estate sectors to redevelop malls and explore alternative uses of space,” Morningstar Credit Ratings Senior Vice President Edward Dittmer said. “A caveat is that once Brookfield digests the GGP portfolio, there may be underperforming shopping centers into which the combined company is unwilling to invest additional capital. These could become a risk over time.”