商业mREIT信贷更新：延长周期持续

1、CommercialmREITCreditExtended CycleContinuesDecember 12, 2019 Equity Research AmericasDoug Harter,ResearchAnalyst 212 5385983 HYPERLINK mailto:douglas.harter Josh Bolton, CFA Research Associate 212 325 8963 HYPERLINK mailto:joshua.bolton Sam Choe, CFA Research Associate 212 325 5957 HYPERLINK mailto

2、:samuel.choe samuel.choeDISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITYDISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports.Asaresult

3、,investorsshouldbeawarethattheFirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthis report as only a single factor in making their investment decision.Noise is Normal: As we get deeper in to the current economic/real estate cycle, we expect an uptick in

4、problem assets in the commercial real estate Noise is Normal: As we get deeper in to the current economic/real estate cycle, we expect an uptick in problem assets in the commercial real estate which could lead to non-accruals and losses for the commercial an uptick like this is normal for a cycle as

5、 extended as this one. That being said, there were no new non-accrual loans in the third quarter for our covered Underwriting standards stable: The commercial real estate lending market remains competitive although most of this competition remains focused on lending spreads, rather than loan covenan

6、ts. Importantly for the credit quality outlook, underwriting standards have been relatively stable in terms of loan structures, and debt service coverage levels.2. Credit Qualitylower: Real estate transaction volumes were lower in October compared to a year ago after being moderately lower (-4%)quar

7、teroverquarterinthethirdWhilemonthlyvolumeswillcontinuetobevolatilewebelievethelongertermtrend isforstable-to-modestlyhighervolumesthisissupportedbythecontinuedsupplyofrealestatefocusedinvestmentdollarsthat are available in the marketplace both in the US and abroad. As yields across the globe trend

8、more investorslooking for yield will look to the commercial real estate space as an attractive risk adjusted return. Additionally, net absorption remains positive, signaling that supply and demand dynamics are favorable, and should lead to sustained strength in commercial real estate pricing and tra

9、nsactions this 3. Transaction VolumeOverall the commercial landscape continues to screen with cap rates and lending standards within normal ranges for thispart of the cycle in our The biggest risk to commercial real estate fundamentals remains a broader economic slowdown impacting demand, rather tha

10、n anything specific to the commercial real estate market. While a broad economic slowdown would negatively impactcredittheimpactwouldbemoremutedthanifwesawaturninthecyclecausedbyeitheraweakeningofunderwriting trends or an oversupply of new buildings. See slide 4 for our CRE Cycle which looks at 9 ke

11、y metrics about the health of the CRE market. From our view the tracker remains in healthy territory, benefiting in the third quarter from an increase in debt service coverage levels. While the tracker indicates that the long term health of the commercial real estate market remains intact, we will c

12、ontinue to monitor to gauge the likelihood of a short-term slowdown.1. Commercial Cycle Where are we?Top PicksCommercial Commercial have Outperform ratings on both BXMT and STWD as the combination of stable ROEs and credit quality(despitesomenoise)shouldallowthecommercialtocontinuetoproduceanattract

13、ivedividendyieldforinvestors. The sector is currently trading at a 375 bp wider yield than CMBS BBB- yields compared to a long-term average of 225 bps. STWD is our top pick given the combination of 1) higher dividend yield (with a lower payout ratio), 2) lower leverage, and 3) a more diversified bus

14、iness model to better protect earnings in a commercial real estate downturn.Real estate services: have an Outperform rating on CWK given our confidence in the company to continue to generate attractive revenue growth and margin expansion. This revenue growth is supported by our favorable view of the

15、 commercial real estate market plus ability to continue to take share in the global real estate services 4. Reiterate Outperforms on STWD, BXMT and CWKOurCSRealEstateCycleTrackerisatoolthatintegratesmanyofthemetricsweusetomeasurethe healthofthecommercialrealestatelandscapetohelpusdeterminewhereweare

16、intherealestatecycle bycomparingpresentmetricstopastcycles.Belowontheleft,weshowtheaverageofour9metricsas a%ofthepeakoverthelast18yearsvs.thelevelseenin4Q06(oneyearbeforethestartoftheGreat Recession).Thetrackerdecreasedinthesecondquarter,drivenbyanimprovementinDSCRbeingthe primary driver. From our v

17、iew this is a normalized level for this part of the cycle, and we believecredit remainsdisciplined,givingusconfidenceinthehealthofthecycledespiteitsadvancedage. CSCycleTrackerCS CycleTracker100%75%50%43%45%43%47%48%45%39%38%42%37%40%41%39%25%0%4Q20062Q2019$/square footCap RateLeverageDebt CoverageLo

18、an to ValueOccupancyValuationTransaction Vol4Q20062Q2019$/square footCap RateLeverageDebt CoverageLoan to ValueOccupancyValuationTransaction VolYield Curve0-50% of Peak50-75% of Peak75%-100 of Peak2010-20194Q06 LevelWe use CMBS spreads as a market based indicator of relative comfort with commercialr

19、ealestaterisk.CMBSspreadshavebeeninarelativelytightrangefor the past 3 quarters following the 4Q18 widening and 1Q19 recovery. BBB- spreads are modestly (15-25 bps) wider in the currentquarter. BBB- CMBS 2.0 spread to swaps9.08.07.06.05.04.03.02.01.00.0Source: Credit Suisse LOCUS CommercialPriceInde

20、xOffice CapRates16020.0%9.0%14015.0%8.5%12010.0%8.0%1005.0%0.0%807.5%- 5.0%60- 10.0%7.0%40- 15.0%6.5%20 CommercialPriceIndexOffice CapRates16020.0%9.0%14015.0%8.5%12010.0%8.0%1005.0%0.0%807.5%- 5.0%60- 10.0%7.0%40- 15.0%6.5%20- 20.0%0- 25.0%6.0%Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08

21、 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18Jan-05 Oct-05 Jul-06 Apr-07 Jan-08 Oct-08 Jul-09 Apr-10 Jan-11 Oct-11 Jul-12 Apr-13 Jan-14 Oct-14 Jul-15 Apr-16 Jan-17 Oct-17 Jul-18Apr-19CommercialPriceindexY/Y change(%)Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec

22、-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18Jan-05 Oct-05 Jul-06 Apr-07 Jan-08 Oct-08 Jul-09 Apr-10 Jan-11 Oct-11 Jul-12 Apr-13 Jan-14 Oct-14 Jul-15 Apr-16 Jan-17 Oct-17 Jul-18Apr-19 Total Monthly Transaction Volume ($M)100,00080,00060,00040,00020,0000CRE transaction volume was

23、 down 29% year over year in October after postinga48%year-over-yeargainlastmonth.Lookingatitonamorestable trailing12-monthbasisvolumeswereup2.4% Total Monthly Transaction Volume ($M)100,00080,00060,00040,00020,0000TotalVolume($M)12 Month MovingAverage Y/Y Change (bymonth)200%150%100%50%-50%-100%1Q07

24、1Q072Q073Q074Q071Q082Q083Q084Q081Q092Q093Q094Q091Q102Q103Q104Q101Q112Q113Q114Q111Q122Q123Q124Q121Q132Q133Q134Q131Q142Q143Q144Q141Q152Q153Q154Q151Q162Q163Q164Q161Q172Q173Q174Q171Q182Q183Q184Q181Q192Q193Q19The demand for new space continues to outpace supply as net absorption remained positive and is

25、supported by continued employment growth. USOfficeNetAbsorption(as%oftotalinventory)0.50%0.25%0.00%-0.25%-0.50%-0.75% DebtServiceCoverageRatio2.402.202.001.801.601.401.20 DebtServiceCoverageRatio2.402.202.001.801.601.401.201.00 DebtYield16.0%15.0%14.0%13.0%12.0%11.0%10.0%9.0%8.0%7.0%6.0%Jan-04 Nov-0

26、4 Sep-05 Jul-06 May-07 Mar-08 Jan-09 Jan-04 Nov-04 Sep-05 Jul-06 May-07 Mar-08 Jan-09 Nov-09 Sep-10 Jul-11 May-12 Mar-13 Jan-14 Nov-14 Sep-15 Jul-16 May-17 Mar-18Jan-19Jan-04 Nov-04 Sep-05 Jul-06 May-07 Mar-08 Jan-09 Nov-09 Sep-10 Jul-11 May-12 Mar-13 Jan-14 Nov-14 Sep-15 Jul-16 May-17 Mar-18Jan-19C

27、ommercialApartmentBelow, we show historical LTVs on the lending portfolios of STWD and BXMT. We would note that BXMT LTV is as originated, while STWD marks theirpropertiestomarketeveryquarterandupdatesportfolioLTVformovesin CREprices. BXMTSTWD65%66%64.0%64.0%64%63.6%65%64%63.3%64.9%64.6%64.4.3%63.0%

28、64%63.8%63%62.8%63.4%63%62.4%62.7%62.5%63.3%63%62.9%62.9%62.8%62.2%62.4%62.462.5%62%61.8%61.8%61.9%62%61.6%61.3%62%61.2%61.1%61%61%60.9%60.961.060.7%60.5%61%60%60%59%Both BXMT and STWD provide internal risk ratings for the loans in their lendingportfolios. Whilenotdirectlycomparable(sincetheratingsa

29、reinternal andnotstandardizedacrosstheindustry),wefinditusefultolookathowthe portfolio risk characteristics have trended overtime. BXMTSTWD100%80%60%40%20%3.23.02.21Q152Q151Q152Q153Q154Q151Q162Q163Q164Q161Q172Q173Q174Q171Q182Q183Q184Q181Q192Q193Q19100%80%60%40%20%3.23.02.21Q152Q151Q152Q153Q154Q151Q1

30、62Q163Q164Q161Q172Q173Q174Q171Q182Q183Q184Q181Q192Q193Q19RiskRating4Risk Rating3RiskRating2Risk Rating Weighted average Risk RatingNon-AccrualRisk Rating5RiskRating4Risk Rating3RiskRating2Risk Rating Weighted average Risk RatingNone of our commercial mREITs had new non-accrual loans so far in 2019,

31、followingSTWDandACREeachhavingnewproblemloansinthe4th quarter of 2018. During the first quarter ACRE took ownership of its prior problem loan (hotel), with no expected loss as the current value equaled the loans carryingvalue. Default%(quartersnotshownhadnodefaults)18.0%16.0%15.7%14.0%12.0%10.0%8.0%

32、6.0%4.0%2.0%0.0%0.4%1.1%3.6%2.2%2.7%2.6%2.5%2.9%2.4%2.1%2.1%2Q131Q142Q153Q154Q154Q163Q172Q183Q184Q181Q192Q193Q19ACREBXMTSTWDNote: Chart includes maturity defaultsGiven the continued low level of10-year yields, the commercial mREITs are currentlytradingata372bpspreadtoBBB-yield,(belowthehighof441 wes

33、awearlierthisyear),thiscomparestoa225bpaveragespreadoverthe past 5 years. Given the low absolute level of rates it is unsurprising that spreads are at wide levels, but this should act as somewhat of a cushion if ratesrise. CommercialmREITDividendYieldvsBBB-Yield(overswaps)5.00%4.50%4.00%3.50%3.00%2.

34、50%2.00%1.50%1.00%0.50%0.00% Companies included in the chart: ACRE, ARI, BXMT, GPMT, KREF, STWD, TRTX Source: Credit Suisse Locus, FactsetAppendixRetailexposureremainsaverylow%ofthelendingportfoliosforcommercialmREITs. LoanMix(asof3Q19)updated100%90%80%70%60%50%40%30%20%10%26%17%18%34%50%23%16%26%17

35、%18%34%50%23%16%36%15%30%Other Retail Multifamily Hotel OfficeSource: Company Data ACREBXMT0.700.600.500.400.300-0.10-2.5% -2.0% -1.5% -1.0% -0.5%0.0%0.5%1.0%1.5%2.0%2.5%0.450.400.350.3050.100.050.00-0.05-0.10-2.5% -2.0% -1.5% -1.0% -0.5%0.0%0.5%1.0%1.5%2.0%2.5% STWD4Q Impact ofRates80.060.040.020.0

36、0-2.5% -2.0% -1.5% -1.0% -0.5%0.0%0.5%1.0%1.5%2.0%2.5%Source: Company Data, Credit Suisse Research$0.014$0.012$0.010$0.008$0.006$0.004$0.002$-ACREBXMTSTWDThe commercial mREITs remain diversified from a regional perspective.17%Southeast,17%Southeast,33%Midwest, 19%West, 25% ACRE BXMTSTWDSouthwest, 4%

37、 BXMTSTWDMidwest, 8%Northeast,Midwest, 6% Mid Atlantic,7%Southeast,Northeast,Southeast, 14%West, 22%27%International,24%10%Southwest,14%International,15%29%West, 20%Source: Company Data OwnershipbyCompanyPriceIndex40%35%30%25%20%15%10%36%36%15%14%15%14% Vacancy (%)Rent Vacancy (%)RentGrowth(Y/Y)7.0%

38、6.0%5.0%4.0%3.0%2.0%1.0%0.0%200180160140120100Dec-00 Dec-01 Dec-02 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17Dec-181Q103Q101Q113Q111Q123Q121Q133Q131Q143Q141Q153Q151Q163Q161Q173Q171Q183Q181Q193Q191Q113Q111Q123Q121Q133Q

39、131Q143Q141Q153Q151Q163Q161Q173Q171Q183Q181Q193Q19Source: Credit Suisse; the BLOOMBERG PROFESSIONAL service1Q103Q101Q113Q111Q123Q121Q133Q131Q143Q141Q153Q151Q163Q161Q173Q171Q183Q181Q193Q191Q113Q111Q123Q121Q133Q131Q143Q141Q153Q151Q163Q161Q173Q171Q183Q181Q193Q19Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05

40、 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18Office OwnershipbyCompany60%50%50%40%30%20%10%0% VacancyOffice OwnershipbyCom

41、pany60%50%50%40%30%20%10%0% Vacancy(%)18%18%17%17%16%16%Source: Credit Suisse; the BLOOMBERG PROFESSIONAL service3Q1017%ACRE1Q1117%ACRE3Q111Q123Q121Q133Q131Q14BXMT3Q14BXMT1Q153Q151Q163Q161Q1734%STWD3Q1734%STWD1Q183Q181Q193Q19 Price PriceIndex1401201000 RentGrowth(Y/Y)4.5%4.0%3.5%3.0%2.5%2.0%1.5%1.0%

42、0.5%0.0%-0.5%3Q111Q123Q121Q133Q131Q143Q141Q153Q151Q163Q161Q173Q171Q183Q18191Q19193Q19Jan-05 Oct-05 Jul-06 Apr-07 Jan-08 Oct-08 Jul-09 Apr-10 Jan-11 Oct-11 Jul-12 Apr-13 Jan-14 Oct-14 Jul-15 Apr-16 Jan-17 Oct-17 Jul-18 Apr-1920Jan-05 Oct-05 Jul-06 Apr-07 Jan-08 Oct-08 Jul-09 Apr-10 Jan-11 Oct-11 Jul-

43、12 Apr-13 Jan-14 Oct-14 Jul-15 Apr-16 Jan-17 Oct-17 Jul-18 Apr-1920Hotel OwnershipbyCompany CapRate10.5%10.0%9.5%9.0%8.5%8.0%7.5%7.0%25%23%20%18%16%15%10%5%0%Hotel OwnershipbyCompany CapRate10.5%10.0%9.5%9.0%8.5%8.0%7.5%7.0%25%23%20%18%16%15%10%5%0%ACREBXMTSTWD$/sq ft250200150100500Source: Credit Su

44、isse; the BLOOMBERG PROFESSIONAL serviceDec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 De

45、c-18Retail %ofOutstandingLoanBalanceRetail %ofOutstandingLoanBalance Vacancy(%)12%11%11%10%10%9%Source: Credit Suisse; the BLOOMBERG PROFESSIONAL service3Q100.0%ACRE1Q110.0%ACRE3Q111Q123Q121Q133Q131Q143.0%BXMT3Q143.0%BXMT1Q153Q151Q163Q161Q173.6%STWD3Q173.6%STWD1Q183Q181Q193Q19 PriceIndex120100806040

46、200 PriceIndex120100806040200 RentGrowth(Y/Y)2.5%2.0%1.5%1.0%0.5%0.0%-0.5%-1.0%3Q111Q123Q121Q133Q131Q143Q141Q153Q151Q163Q161Q173Q171Q183Q18211Q19213Q19CS MetricsTransaction Velocity % of PeakTotal dollar value of US commercial real estate transactions divided by the Moodys Commercial Price IndexCap

47、Rate SpreadThe capitalization rate on US office transactions less the Effective Yield on BBB Corporate Bonds.CRE LeverageTotal US outstanding commercial mortgages divided by nominal Gross Domestic Product for the USOccupancyTotal US office occupancyStock Market ValuationEarnings Yield on S&P 500 les

48、s the yield on 10-year US TreasuryYield CurveYield on 10-year US Treasury Notes less the yield on 2-year US Treasury NotesDSCRDebt Service Coverage Ratio$/square footUS office segment year-over-year change in $/square foot priceLTVLoan to Value of Commercial Properties, excluding Apartments 4Q16vs3Q

49、19trackermetricsas%ofpeakSource: Credit Suisse Research100%90%80%70%60%50%40%30%20%10%98%81%12%16%17%81%12%16%17%39%44%51%52%50%53%68%91%88%92%88%58%3Q194Q06DisclosuresCompanies Mentioned Analyst CertificationDisclosure AppendixI, Douglas Harter, CFA, certify that (1) the views expressed in this rep

50、ort accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.As of December 10, 2012 Analysts stock rating are defined

51、as follows:Outperform (O) : The stocks total return is expected to outperform the relevant benchmark* over the next 12 months. Neutral (N) : The stocks total return is expected to be in line with the relevant benchmark* over the next 12 months. Underperform (U) : The stocks total return is expected

52、to underperform the relevant benchmark* over the next 12 months.Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisses engagement in an

53、 investment banking transaction and in certain other circumstances.Not Rated (NR) : Credit Suisse Equity Research does not have an investment rating or view on the stock or any other securities related to the company at thistime.Not Covered (NC) : Credit Suisse Equity Research does not provide ongoi

54、ng coverage of the company or offer an investment rating or investment view on the equity security of the company or related products.Volatility Indicator V : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the a

55、nalyst expects significant volatility going forward.Analysts sector weightings are distinct from analysts stock ratings and are based on the analysts expectations for the fundamentals and/or valuation of the sector* relative to the groups historic fundamentals and/or valuation:Overweight : The analy

56、sts expectation for the sectors fundamentals and/or valuation is favorable over the next 12 months. Market Weight : The analysts expectation for the sectors fundamentals and/or valuation is neutral over the next 12 months. Underweight : The analysts expectation for the sectors fundamentals and/or va

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