Two more commercial mortgage bonds put on hold amid market weakness

A nearly $1.9 billion commercial mortgage bond linked to a portfolio of office buildings owned by Columbia Property Trust Inc. and Allianz SE was delayed on Wednesday due to market weakness, according to two bond investors.

And a commercial mortgage-backed security led by Deutsche Bank, known as COMM 2022-LSC, was also delayed after early conversations with investors.

The two transactions bring the number of CMBS delayed in recent weeks to at least three as Russia’s invasion of Ukraine further upset capital markets already shaken by impending Federal Reserve rate hikes. On Monday Deutsche Bank delayed a different CMBS, a $1.5 billion offering linked to the firm’s new headquarters in Columbus Circle.

Selling any kind of debt, from junk bonds to asset-backed securities, has grown more unpredictable recently, as steep moves in yields result in more deals getting postponed. It’s a sharp change in markets that for much of the last two years would hand out credit to just about any borrower.

The Columbia Property deal, known as CXP 2022-CXP, was initially marketed on Feb. 16 and was expected to price during the week of Feb. 21, according to deal documents seen by Bloomberg. The transaction securitized two loans tied to seven office buildings located in New York, Boston, San Francisco Jersey City, and Washington, D.C.

Goldman Sachs Group Inc., Citigroup Inc., and Deutsche Bank funded the loans and arranged the CMBS, which was meant to help finance the privatization of Columbia Property Trust, the deal documents say. Last September, Columbia Property said that it was being taken private by Pacific Investment Management Company, a subsidiary of Allianz SE, for $3.9 billion including debt.

Representatives from Goldman Sachs, Citigroup and Columbia Property declined comment, while a representative from Allianz SE did not respond to inquiries. Deutsche Bank didn’t comment on the Columbia deal or the COMM 2022-LSC transaction.

Volatility, Office

In addition to general market weakness, some investors said the fact that the Columbia Property deal was tied to office buildings -- a class of property where revenue is uncertain now as more people work from home -- did not help the matter.

“Volatility and office are not a great combo,” said Daniel McNamara, founder and CIO of Polpo Capital, a CMBS hedge fund.

The CXP transaction is tied to seven office buildings in relatively strong locations, including 1800 M Street in Washington, D.C. and 229 West 43rd Street in Manhattan, according to deal documents. The D.C. building is attached to one loan, and the other six properties are attached to a second loan.

Even with fears about the future of office space last year, a string of marquee properties were able to sell CMBS in 2021 as investors clamored for securitized bonds that offer a little more yield than other asset-backed debt and corporate paper.

CMBS without backing from government-sponsored enterprises, tied to offices and other kinds of real estate, hit a post-crisis issuance record last year with sales of more than $155 billion, according to data compiled by Bloomberg News.