• Buzzard Outage Sends Ripple Down Forties Supply Chain 2 years ago

    The Buzzard field, the largest contributor to Forties flow, was shut on April 4 due to unplanned maintenance at one of the onshore processing plants. The outage affected vessel loading at Hound Point, one of the delivery points for the Forties pipeline system, and significant flaring activity at the Buzzard offshore platform was observed via satellite. Buzzard resumed operation on April 6, according to Reuters, and by April 9, Genscape saw that the Forties oil balance flow (moving average) had nearly recovered to pre-Buzzard-outage levels.  

    Following the restart of Buzzard production, between April 7 to 9, the seven-day average Forties oil balance flow, an assessment of pipeline flow via the volumes received at the three delivery points, averaged 375,000 barrels per day (bpd). During the two-day production cut, Forties flow averaged 327,000 bpd, a 20 percent decrease from pipeline rates April 1 to 4 when flow averaged 410,000 bpd.

    Flow lower ahead of Buzzard upset

    Previously, at the end of March, Genscape saw a significant drop in Forties pipeline flow (Figure 1). Flow only averaged 393,000 bpd for the last nine days of March, compared to 504,000 bpd for the previous nine days. Overall March flows were slightly higher at 452,000 bpd compared to 442,000 bpd for February.

    Vessels wait to load at Hound Point

    The VLCC Tamagawa finished loading Forties crude at Hound Point late April 7 (Figure 2) and departed the following morning, according to Genscape. She was initially heading towards Brixham, United Kingdom, but changed destination on April 10 to Tianjin, China. Prior to the Tamagawa loading, no tankers had loaded at Hound Point in over a week, which was the longest lull with without tankers docking since October 2016.

    Lower Forties flow, due to the Buzzard production disruption, likely delayed loading of the VLCC. Generally, crude oil inventories at Dalmeny, the staging storage location for crude bound for Hound Point deliveries, are near two million barrels (bbls) before a VLCC commences loading. Dalmeny inventories, however, were only 1.7 million bbls prior to the Tamagawa loading.

    The Baltic Glory arrived at Hound Point just before midnight on April 10, while the Gener8 Miltiades was expected to arrive at Hound Point on April 11 but had not docked as of April 12, coming from Yanbu, Saudi Arabia, according to Genscape Vesseltracker™ AIS data. With multiple tankers listed on the loading program and in the vicinity (including floating storage), activity is ramping up following the Buzzard outage.

    The Forties pipeline system has an oil processing capacity of 1.15 million bpd and flows from the Forties Unity platform to the Kinneil crude stabilization plant. From there, stabilized oil is delivered either directly to ship at Hound Point, to tank at Dalmeny or to the refinery at Grangemouth. Genscape monitors several pumping stations and facilities including Kinneil, Grangemouth, Cruden Bay, and Netherley. Genscape's daily Forties Supply Hub report provides critical insight and daily developments on all key factors of this pipeline system, which is one of the main contributors to the Brent crude benchmark. Please click here to learn more, or to request a free trial of Genscape’s Forties Supply Chain Monitor.

  • 5 Largest CMBS Loan Losses - March 2017 2 years ago

    The recent trend of high monthly disposition volumes continued in March as 73 CMBS loans totaling $1.5 billion were liquidated last month, the highest such volume in 15 months. Due to the resolution of several large office and retail notes, average loan size remained elevated at $20.5 million, up slightly from $20.4 million in February. Overall loss severity ticked down for the third straight month, falling to an average loss rate of 32.17% in March from 48.76% in February, and a recent high of 57.83% in January.

    Retail loans incurred the highest realized loss amount last month at $225.1 million total. Office and mixed-use loans followed with $162.6 million and $37.6 million, respectively. Office notes alone comprised nearly half of the month’s disposition volume. Retail loans represented 22.3%, followed by the mixed-use segment at 20.3%. Retail loans carried the highest loss severity of the three, climbing 2.6% from February to 67.4% last month. Office loss severity fell from the month prior and clocked in at a modest 24.5%.

    Below are the five CMBS loans that incurred the largest losses by amount per March’s remittance updates.

    1. Citadel Mall

    Backed by a 296,707 square-foot portion of a Charleston, South Carolina shopping center, the $62.7 million Citadel Mall loan was disposed with the largest loss observed in March's remittance data. The outstanding balance of the note was written down in total last month. Big-box retailers Dillard’s, Belk, Sears, JCPenney and Target serve as anchor tenants for the Citadel Mall, but none of those tenants are part of the loan collateral. (The mall’s total square footage exceeds 1.1 million.) The loan was transferred to special servicing in May 2013 for imminent default. Though the collateral was 90% occupied at the end of 2013, DSCR (NCF) clocked in at just 0.54x. DSCR fell from that level to -0.09 at the end of 2015, and then to -0.49x one year later. As of January 2017, the loan collateral was 90% occupied, though about 23% of that figure is made up of temporary tenants. The note backed 3.13% of WBCMT 2007-C32 prior to liquidation, a deal which has had 5.6% of its original collateral written off.

    2. Glendale Center

    The $125 million note tied to the Glendale Center incurred the second-largest loss last month. Backed by a 382,841 square-foot office in the city of Glendale, California, the $125 million loan was sold off at a loss of $57.6 million, or a 46.09% loss severity. The Walt Disney Company and AT&T are the top tenants at the property. After being transferred to special servicing in October 2011 for a default stemming from cash flow issues, the asset was returned to the lender in August 2012. Bank of America once took up 23.1% of the building’s square footage, but the firm did not renew their lease after it expired in April 2013. Occupancy and DSCR (NCF) suffered as a result of BoA’s departure, with the former metric falling from 100% at year-end 2010 to 77% at the end of 2013. In that same time period, DSCR slipped from 1.37x to 0.75x. Before disposal, the Glendale Center loan comprised 24.1% of WBCMT 2006-C27. 9.72% of that deal’s original collateral balance has been lost to write-downs.

    3. Newburgh Mall

    The third-largest loss incurred in March belonged to the $29.1 million Newburgh Mall loan. With a realized loss total of $28.0 million, the note was disposed at a loss severity of 95.75%. The loan collateral is a 379,729 square-foot, regional mall located in Newburgh, New York. The note was transferred to special servicing in November 2011 and became REO in September 2014. By the time it was sent to servicing, loan occupancy was 82%. The borrower cited a weak economy as a factor that negatively affected leasing at the mall. DSCR fell from 1.35x at year-end 2009 to 0.72x by the end of 2013, and then to 0.66x for the first nine months of 2016. Top tenants for the loan collateral are Sears (22.1% of the GLA), Bon-Ton (18.0%), Bed Bath & Beyond (6.42%), and Office Depot (4.75%). The loan made up 21.3% of the remaining collateral behind GMACC 2006-C1 before the write-down, a deal which has lost 13.14% of its original balance to dispositions.

    4. Great Northern Mall 

    Another loan backed by a New York mall was closed out with the fourth-largest loss applied in March. The $32.2 million Great Northern Mall note was closed out with a $26.1 million loss last month, amounting to an 81.21% loss severity. Collateral for the loan was a 504,743 square-foot regional mall located in Clay, New York. Dick’s Sporting Goods (12.9% of the GLA), Regal Cinemas (7.0%), and The Shoe Dept. (6.0%) are the leading tenants at the mall. The loan was originally transferred to special servicing in March 2014, but this was a result of a 13-month maturity extension being granted. After it was returned from servicing in June 2014, the loan was sent to servicing again just five months later as the borrower made it known that it would not be able to refinance by the new maturity date. The Great Northern Mall note comprised 65.87% of BSCMS 2004-PWR3 prior to disposal, a deal which has only lost 3.69% of its original collateral balance to write-downs.

    5. Siena Office Park

    Rounding out March’s list is the $28.6 million Siena Office Park (5), which was disposed with a $26.1 million loss for a 79.01% loss severity. The loan collateral is a two-building, 101,278 square-foot office complex located in Henderson, Nevada. After being on the servicer watchlist for four years, the note was transferred to special servicing in June 2013 due to imminent default. Loan occupancy and DSCR (NCF) were measured at 91% and 1.44x at securitization, respectively. However, those levels dropped to 80% and 1.03x by the end of 2010, and then 56% and 0.46x at year-end 2015. The most recent special servicer commentary stated that “leasing momentum (was) limited as prospects have multiple competitive options.” Prior to the write-down, the Siena Office Park loan made up 79.06% of WBCMT 2007-C32. 5.60% of that deal’s original balance has been lost via dispositions.


    For more info on CMBS loans that have been disposed with losses, drop us a line at

  • EDR to Host Annual PRISM Conference in May 2 years ago

    CRE Industry Conference brings property risk, insights, strategy and markets to light.

    EDR will be hosting its 2nd Annual PRISM Conference May 1-3, 2017 in Charlotte, North Carolina. PRISM is the only industry event that connects leaders from the …

    The post EDR to Host Annual PRISM Conference in May appeared first on EDRnet.

  • The New Byron-Wayne Line: ComEd Congestion Implications 2 years ago

    On Friday, April 7, 2017, Genscape Transmission RT data showed that the new Byron-Wayne 345kV line in western ComEd is now energized after years of anticipation. Now fully in service, the line will be able to carry 1,679 megawatts (MW) from the Byron nuke east towards Chicago. Its path runs parallel to the Cherry Valley – Silver Lake 345kV line and the Nelson – Electric Junction 345kV line, both of which are two of the top contingencies not only in ComEd, but across all of the PJM and MISO regions. These two lines total to 2,698 MW of west-east capacity.


    Around 3:00pm (EDT) on April 7, the Byron-Wayne line was activated and immediately took 800 MWs (Figure 1). Genscape’s Transmission RT data confirmed a large drop in flows on Cherry Valley – Silver Lake 345kV from 760 MWs to 530 MWs (Figure 2). This was roughly a 30 percent reduction in flows.

    The foremost result of the new Byron-Wayne line is reduced flow on the ever-present Cherry Valley-Silver Lake. As it stands, Byron – Cherry Valley is the primary destination for Byron generation. This allows the Silver Lake pathway to be the main artery for the nuke to send power to Chicago. In fact, the Generation Shift Factor (GSF) for Byron 1 on the line is 0.30 in a recent state estimator file. This means that 30 percent of Byron 1’s generation ends up flowing on Cherry Valley – Silver Lake. Inserting 1,679 MW of takeaway capacity from Byron and reduces its GSF on Cherry Valley – Silver Lake by 30 percent down to 0.21.

    Due to the line insertion, a similarly large reduction was found on Nelson – Electric Junction, decreasing the GSF by 39 percent from 0.18 to 0.11. While these two contingencies are clearly impacted, Cherry Valley – Silver Lake appears to be the one most resolved by the Byron – Wayne line, reducing more MWs from Byron, which is also the top source generator. Despite a larger percentage drop in GSF, Nelson – Electric Junction sees a larger impact from generation at closer units such as Nelson, Lee County, and Quad Cities. Inserting Byron – Wayne had the added effect of reducing the GSF from each of the generators on the Nelson line, although this is unlikely to completely prevent risk from developing on the contingency when source-side generation is high.

    Another way of evaluating the impact of the Byron-Wayne on the two contingencies is by computing its Line Insertion Distribution Factor (LIDF) on the two lines. The LIDF measures how flows are displaced on a specific line of equipment by inserting a new piece of equipment into the network. Byron-Wayne LIDFs reveal that flow on Cherry Valley and Nelson lines are reduced by 32 percent and 25 percent, respectively. For Cherry Valley – Silver Lake, this percentage reduction is close to the 30 percent as shown by Genscape’s Transmission RT data.

    Genscape’s PJM Power Market Intelligence Team analyzed the impacts for the new transmission line build in its 2017 Spring Outlook. By examining periods of strong congestion on the Cherry Valley 345kV transformer and Belvidere – 15623 138kV for the loss of Cherry Valley – Silver Lake, the analysis inserted Byron-Wayne into the network and studied the contingencies. Genscape’s PJM Power Market Analyst, Pat Finn, who analyzes ComEd congestion daily, explained the results: “In the flow cases we analyzed, we saw a significant reduction in flows over the chronically congested areas around Nelson – Electric Junction and Cherry Valley – Silver Lake.” Finn noted that although the analysis was limited to a small sample size, “the new line is being immediately tested by outages on the Cherry Valley transformer and Nelson – Electric Junction, and in a high wind scenario it has thus far handled the situation.” 

    Utilizing its vast network of in-the-field monitors, Genscape’s Transmission RT service provides a more robust view of the power grid by showing both generation output and the direction of power flows in near-real-time. Customers receive unparalleled insight into congestion flow patterns resulting in better analysis, trading strategy, and asset optimization. Please click here to learn more or request a free trial of Genscape's Transmission RT.

  • LNG Bunkering Milestone, Genscape’s BunkerPeriscope Provides Insight 2 years ago

    In a milestone for LNG bunkering, the world’s first purpose-built LNG bunkering vessel has completed its first ship-to-ship transfer. From approximately 05:00 UTC to 19:15 UTC on April 10, 2017, the ENGIE Zeebrugge bunkered the Auto Eco in a Zeebrugge vehicle facility with LNG loaded from Fluxys LNG terminal in Belgium.

    The April 10 meeting has been years in the making. The ENGIE Zeebrugge was first ordered in July 2014 and built in Yeongdo Shipyard in Busan, South Korea. After sailing from Busan in late February 2017, the vessel arrived in Zeebrugge on April 1.


    Timeline of events:

    • February 23: the ENGIE Zeebrugge left Busan, South Korea
    • April 1: ENGIE Zeebrugge arrived in Zeebrugge, Belgium
    • April 5-6: From approximately April 5 18:20 UTC to April 6 12:00 UTC, ENGIE Zeebrugge loaded LNG at Fluxys LNG terminal
    • April 10: From approximately 05:00 UTC to 19:15 UTC, ENGIE Zeebrugge bunkered Auto Eco

    The ENGIE will operate in the port of Zeebrugge and transfer LNG loaded from Fluxys LNG terminal in Zeebrugge to LNG-fueled vessels operating in Northern Europe. One such vessel is the Auto Eco, which has made history of its own as the world’s first LNG-fueled car carrier. The ENGIE’s next customer is expected to be the Eco’s sister vessel, the Auto Energy.

    Both vessels represent a watershed moment in the development of LNG bunkering. As emission regulations tighten, LNG bunkering has grown in popularity as a cleaner alternative to oil. Its implementation, however, is limited by the current LNG supply infrastructure, including a lack of dedicated bunker vessels.

    Before the ENGIE Zeebrugge was delivered, for example, the Auto Eco’s bunker fuel was supplied by trucks. This method is infeasible for many vessels and a barrier to a robust LNG bunkering market. There have been some instances of ship-to-ship LNG bunkering, such as when the Coral Energy bunkered LNG to the Ternsund near Gothenburg, Sweden on September 3, 2016, but the Coral Energy is not a dedicated bunkering vessel. The ENGIE Zeebrugge is just the first of several expected vessels whose primary purpose is to provide LNG as bunker fuel.

    The rise of LNG bunkering adds another layer to the already-complex world of bunkering. Genscape’s BunkerPeriscope is a powerful tool to track individual bunkering instances, analyze flows, and predict trends in the global bunkering market. Please click here to inquire about our data in dozens of ports worldwide.

  • Bank Shares Sag on Earnings Concerns; CRE Lending Improves Slightly 2 years ago

    Editor's Note: Our CRE bank lending commentary caught the attention ofThe Wall Street Journal and ZeroHedge yesterday, who both provided their analysis of recent struggles and risk in the lending market. 

    Bank share prices fell last week, as investors tempered their outlook for earnings growth. Shares of the largest banks fell by -1.5% for the week, while shares of regional banks fell by -0.9%. The broader market also fell (by -0.3%) and the 10-year Treasury lost 2 bp to yield 2.373%. Bank share prices have fallen in 4 of the last 5 weeks, a result of both shifts in the economic outlook and the prospects for bank regulatory reform.

    Economic growth is looking somewhat less strong than previously. The jobs report on Friday indicated that hiring hit a soft patch in March. Investors will be watching future economic indicators closely to gauge whether the slow hiring in March is an anomaly or part of an emerging pattern. Loan growth in the first quarter of 2017 has been slower than in recent years (see below). This could represent a temporary adjustment to higher interest rates or it could indicate a longer-term pattern of reduced activity overall. 

    Weekly Trends
    Overall commercial real estate lending growth improved slightly, but still lags behind the pace in 2016. Construction and land development lending grew at an 8.6% annualized rate. Multifamily mortgage lending growth contracted by -10.7%, after a surge in the previous week. Commercial mortgages – the largest component of CRE lending – grew at a respectable 9.2% annual growth rate. The growth rates for construction and land loans and for multifamily mortgages were below the year-to-date trends, while commercial mortgage growth was above trend. Please note: The weekly CRE lending data here is for the period of 3/22/17 to 3/31/17.

    Trends Year-to-Date
    Total commercial real estate lending growth for the year-to-date fell slightly. Per a report published by the Mortgage Bankers Association, commercial real estate lending from banks, insurance companies, and other institutions declined by 3% in 2016. Even with that slight decrease, an article published yesterday in The Wall Street Journal citing Trepp data shows that CRE lenders have become more aggressive in construction and land loans in the first quarter of 2017.  The annualized growth rate for construction and land development currently stands at 11.8%. Multifamily properties’ annualized growth rate for the year-to-date fell to 9.1%. The annualized year-to-date growth rate for commercial mortgages rose to 7.2%.

    For more CRE lending data, sign up for a free trial of TreppLoan. Trepp offers a suite of products for the entire asset life cycle, from finding and underwriting deals, to managing balance sheet assets and measuring performance, as well as supplying nationwide statistics and trends. The breadth of the system’s capabilities makes it ideal for dealmakers, underwriters, asset managers, and portfolio managers.

  • March Job Growth Declines Sharply 2 years ago

    According to the US Bureau of Labor Statistics report released on Friday, total nonfarm payroll employment fell steeply short of expectations in March, as a ten-month low of just 98,000 new jobs were added. CNBC reports that last month's tally is far below the projected expectations of 180,000 new nonfarm roles. Average hourly earnings also slowed from February’s seven-cent increase, but remained positive. In March, the average hourly wage rose five cents to $26.14, bringing the year-over-year wage growth rate to 2.7%. The unemployment rate also declined by 0.2% to a ten-year low of 4.5%.

    The Professional & Business Services sector posted the largest job growth among major segments in March with a net 56,000 new jobs. This is in line with the average monthly gain over the past 12 months. Within administrative and support services, temporary help added 10,500 employments, and services to buildings and dwellings generated 16,800 new jobs. Architectural and engineering services and management/consulting services each tacked on over 7,000 new roles.

    The next highest contributing sector was Education & Health Services, which increased by 16,000 jobs last month compared to 66,000 in February. Hospitals added 8,700 jobs. Outpatient care center employments rose by 5,900, and social assistance followed with 3,200 jobs. These increases were largely offset by job losses within educational services, physicians’ offices, medical and diagnostic laboratories, other ambulatory healthcare services, and nursing facilities, which each lost over 1,000 roles.

    Mining & Logging and Manufacturing each tallied 11,000 new positions, the bulk of which are accredited to support activities for mining (+8,800), fabricated metal products (+5,500), and transportation equipment (+3,000). The Financial Activities, Government, and Leisure & Hospitality sectors each netted 9,000 new jobs. Construction employment increased by a mere 6,000 roles, after gaining 59,000 in February.

    Trade, Transportation & Utilities posted a large net loss of 27,000 jobs last month, with retail trade alone losing nearly 30,000. Positions in general merchandise stores fell by 34,700, likely a result of the latest slew of retail closures. The majority of those jobs were in department stores (-12,600). Electronic markets, agents & brokers, health and personal care stores, and clothing/accessories stores each decreased by over 3,000 jobs. 

    Last month’s numbers were the lowest recorded in the past ten months. However, CNBC notes that the market reaction was “muted,” as many dismissed the flop as a repercussion of the March snow storm that hit the Northeast US, as well as some inevitable retail bankruptcies. The storm may have affected foot traffic for many already-struggling retailers, and impacted construction work. Although the job numbers were a “blow to expectations that President Donald Trump’s pro-growth agenda would fuel an economic boom,” the wage growth rate kept its upward trend while unemployment slid downward. However, the March job report overall reflects the economy’s growth and challenges, and may suggest that its growth is not as robust as many thought. Consumer and business sentiment has risen significantly since the election, but the March employment situation may be shedding light on the gap between true economic growth versus perceptions. As the Federal Reserve has two more interest rate hikes planned for 2017, the April report will be extremely indicative of the whether or not the March numbers reflect a short-lived plunge or a sluggish economy.

  • Wall of Maturities Update: April 2017 2 years ago

    Though there was plenty of madness in March, the final result of maturing CMBS performance was a positive one. Nearly 86% of the maturing debt that was paid off last month did so in full either prior to, at, or after maturity. The average loss severity for loans liquidated in March was, by far, the lowest level posted in the last 12 periods. However, the amount of maturing debt does not wane in April as $8.7 billion in private-label CMBS is in need of refinancing this month.

    Historical Perspective

    Based on a March 2017 snapshot, more than $245.2 billion in CMBS loans have paid off in any manner since January 2015, including disposals with losses. Those disposed loans were written off with cumulative losses of more than $10.1 billion, which amounts to an average loss severity of 43.26%.

    In the 12-month period between April 2016 and March 2017, $117.6 billion in securitized mortgage debt was liquidated, 8.60% of which suffered losses at resolution.

    Outlook: Upcoming Maturities

    Over the next 6 months through September 2017, roughly $55.8 billion in CMBS debt will come due. 5.98% of that total is past due on payment and 10.57% is in special servicing. As the two dominant property types, office and retail loans comprise 26.25% and 26.63% of the volume maturing during this time frame, respectively.

    Out of the $8.7 billion in CMBS debt that is scheduled to mature in April, over 8.94% has fallen into default (categorized as 60+ days delinquent, in foreclosure, REO, or non-performing balloons), while 13.33% has been transferred to special servicing. From this total, 7.79% is carrying an appraisal reduction amount (ARA) that could lead to potential losses at resolution.

    Excluding loans where maturity extension options have recently been exercised, the largest loan due in April is the $550 million CMBS mortgage behind the 1.38 million-square-foot Wells Fargo Tower in Downtown Los Angeles. Namesake tenant Wells Fargo occupies the largest chunk of square footage with nearly 20% of the building’s NRA on a lease that expires in June 2023. Since 2013, occupancy at the 53-story trophy office has fallen to 83% due to tenant rollover, while DSCR has consistently clocked in below 1.0x since 2011.

    This is the third iteration of the report Trepp will publish every month until the end of 2017 in an effort to monitor the wall of maturities as the market enters the home stretch of scaling this large amount of maturing CMBS debt.

  • Syncrude Fire Pushes Synthetic & Heavy Differentials Higher, Impacting Canadian Production Forecast 2 years ago

    On March 14, 2017, a fire occurred at the naphtha hydrotreater located on the 350 Mb/d Syncrude upgrading facility in Fort McMurray, AB. With the upgrader representing approximately 30 percent of Western Canada’s synthetic crude oil (SCO) production capacity, the news of the fire had an immediate market impact seen in the widening of the Canadian Sweet Synthetic-WTI premium. With the Syncrude upgrader already scheduled for a spring turnaround in April (approximately 45 Mb/d planned impact), the company decided to move up the maintenance to start immediately due to the fire.  

    The production impact of the fire is substantial in the near term with up to 50 percent (roughly 175 Mb/d) of production capacity estimated to be off line in April, with majority owner Suncor stating in a press release on March 27 that “…Pipeline shipments of treated product are expected to resume at up to 50 percent capacity in April, gradually ramping up to full rates after the turnaround is complete.”  

    There have been some conflicting reports recently of the impact putting the facility completely offline with no deliveries for April, which differs from statements from Suncor, which reiterated that the 50 percent impact is the correct outlook for shipments from the upgrader for April. It is important to note this 50 percent is based off of shipments, which in normal operations could be sourcing from both production and standing inventory.

    An additional indirect result of the fire is production at ConocoPhillips approximately 140 Mb/d SAGD Surmont facility has been scaled back, due to Syncrude synthetic volumes being used as diluent for Surmont bitumen production.

    Price Impact

    The Canadian Sweet Synthetic-WTI differential has been trading as wide as +$5.03 for May settlement. This has been driven by Suncor’s announcement of reduced shipments in April, signaling that customers with prior long-term contracts are being prioritized over short term/cash market customer shipments. WCS-WTI has also seen a substantial tightening, with May recently trading at -$9.70, most likely caused by the increased cost of SCO as diluent for the heavier WCS barrels.

    Western Canadian Outlook

    While the fire has had a pronounced effect on near-term prices of Canadian Sweet Synthetic and WCS, the full year production impact has been less dramatic, reinforced by Suncor’s announcement that 2017 full year guidance is unchanged. The expected impact of the outage has been factored in to Genscape’s most recent Canadian Crude Oil Production Forecast, with the current forecast for synthetic production at +105 Mb/d year-over-year, compared with Genscape’s outlook of +116 Mb/d year-over-year prior to the fire. The COP Surmont impact has also been factored into the forecast, with bitumen production growth at +240 Mb/d year-over-year, compared to +244 Mb/d pre-fire.

    The forecasted impact of the hydrotreater fire for Syncrude production and the early turnaround start can be seen below in the chart from the Genscape Canadian Crude Oil Production Forecast.

    Despite the disruption, Western Canadian production is still firmly in growth mode in 2017, driven by brownfield SAGD projects, upgrader capacity expansions, and the continued improvement in thermal extraction technologies.

    Genscape’s Canadian Crude Oil Production Forecast uses a highly detailed bottom-up approach that examines the most significant oil producing areas in Canada providing a detailed production forecast and analysis. The report incorporates provincial well level data along with oil sands in-situ project and upgrader level data to provide the most accurate and detailed driven supply forecast report on the market. Click here to learn more about the Canadian Crude Oil Production Forecast.

  • Latest Conduit CMBS Issues Price at Widest Levels of 2017 2 years ago

    After the month of March was closed out with two high-volume trading weeks, the second quarter of 2017 began with roughly $580 million out for bid last week. In the past week, cash and CMBX spreads across the 6-10 series all underwent some modest widening. While CMBX 6/7/8/9/10 AAA spreads at the top saw very little movement, BBB- spreads came out between three and 14 basis points. For the first quarter as a whole, the cash market posted some spread gains while the CMBX indexes suffered considerable sell-offs in the older 6-8 series (especially at the bottom of the credit stack) due to continued retail malaise.

    Two larger-sized conduit transactions have priced since last Friday, both of which featured Rialto as the B-piece buyer. AAA spreads for the $1.0 billion CGCMT 2017-P7 printed at 98 basis points over swaps, which ranks as the widest conduit pricing for a deal's benchmark class since risk retention rules were implemented. The risk retention requirement in the offering is satisfied via the hybrid structure; the issuers will retain a 2.2% vertical strip while Rialto will take the remaining 2.8%. For the most recent BANK 2017-BNK4 issue, AAA spreads cleared at 95 basis points over swaps while the BBB- priced at 375 basis points. Bank of America, Morgan Stanley, and Wells Fargo will collectively retain a 5% vertical strip in the transaction.

    CMBS issuance is expected to pick up as origination activity rises and regulatory uneasiness winds down in the second quarter. Based on Friday’s Commercial Mortgage Alert issue, $17 billion in conduit and single-asset/single-borrower (SASB) transactions are on track to price in April and May alone. The pipeline of SASB loans is noted to be especially strong and could boost H1 2017 issuance volume above the total recorded for the same period in 2016.

    In terms of notable bankruptcy-related announcements, Gordmans disclosed its list of 57 stores that are expected to operate under the ownership of Stage Stores, as well as the 48 locations marked for liquidation. In looking to add Gordmans to its current retail lineup, Stage Stores placed the winning bid of $75.6 million to acquire nearly half of the retailer’s physical stores through a bankruptcy auction last week. In the past few days, Payless Shoes and Westinghouse Electric Company also joined the list of firms that have recently filed for bankruptcy. Payless will be shuttering 400 lower-producing stores from its footprint, while Westinghouse has been put up for sale by parent company Toshiba after racking up hefty costs from its southeastern nuclear projects.

    The CMBS exposure for Gordmans and Payless stores on the chopping block can be found In the Spotlight here.

    New Conduit Issuance

    Trading and CMBX Spreads

    CMBS Swap Spreads

    Legacy LCF Price and Swap Spread Movement


    Top Credit Stories from the Week

    - US CMBS Delinquency Report: Delinquency Rate Continues to Climb in March 

    - March Loss Analysis: Average loss Severity Dips on High Liquidation Volume 

    - Gordmans: Many Stories to Remain Open

    - NYC Office Tower Gets $85M Refi Loan (COMM 2007-C9)

  • REITs Descend in March, but Close Q1 with Positive Returns 2 years ago

    According to NAREIT, overall REIT performance sagged in March, as investors seemingly took a more cautious approach towards the sector. The total returns of the FTSE NAREIT All REITs index fell  1.4% last month, while the S&P 500 gained 0.1%. The best performing sector was infrastructure, which posted 3.55% total returns. Data centers also significantly increased, gaining 2.57% on the month. According to Hoya Capital Real Estate’s weekly update, “demand for server space continues to outpace supply growth,” which has boosted Digital Realty (NYSE:DLR) and CoreSite (NYSE:COR) each by over 8% this quarter. Cell Tower REITs, such as American Tower (NYSE:AMT), are near record highs as well. The timber and industrial REIT sectors were among the month’s top performers as well, posting 1.69% and 1.32% total returns, respectively.

    Last month, the retail REIT sector took a -5.72% dive, as each of the three subsectors had negative returns. Shopping centers had the lowest performance and were down by 6.42%. Regional malls had -6.23% returns, and the free-standing subsector clocked in at -3.06%. As more recent bankruptcies such as Gordmans and Payless cause dozens of storefronts to shutter, market sentiment towards retail real estate is “overwhelmingly negative,” which is reflected in the recent REIT results. However, the underlying fundamentals for brick-and-mortar retail are still quite strong, and the sector will likely bounce back after the market is modernized by more millennial-friendly retailers. Self-storage and office REITs were also among the worst performers, as the sectors respectively posted -4.47% and -3.65% in returns last month.

    The All REITs Index for the first quarter overall was 3.0%, which is still short of the S&P 500’s 6.1% return. Single-family homes, timber, infrastructure and specialty REITs each closed out the quarter with strong returns over 12%. On the other hand, the retail sector was also the lowest performing sector of the quarter, followed by lodging loans. Bloomberg’s Jeffery Langbaum asserts that last month’s overall lackluster performance “was partially related to interest rate policy,” but more fundamental market issues also played into each sector’s performance. In spite of that, REITs overall have inched ahead with positive returns for the quarter, despite moving lower in March.

  • Cushing & Texas Gulf Coast Crude Inventories Reach Record High 2 years ago

    Crude stocks in Cushing, Oklahoma, climbed to 71.3 million barrels (bbls) for week ending March 31, 2017, a record-high level, according to Genscape. Inventories along the Texas Gulf Coast reached a record high in the same week, climbing to 87.2 million bbls. Mounting storage levels put downward pressure on crude prices as Genscape’s Cushing report was released on April 3, and the Energy Information Administration (EIA) reported supporting data on April 5. Stocks could continue to build in the U.S. Gulf Coast as Cushing borders capacity.

    Last week’s increase at the Cushing hub marked the sixth consecutive week of builds. Stocks have increased by 6.6 million bbls since week ending February 17. Total capacity before Genscape coverage began in 2009 was around 51 million bbls, indicating that last week’s inventory level was the highest of all time. Inventories at the hub were 395,000 bbls higher than the previous record of 70.9 million bbls set week ending May 13, 2016, and 2.5 million bbls above inventories from the corresponding week in 2016.

    Capacity utilization rates at Cushing remained below the highest level, also set on May 13, 2016, due to new capacity that has come online. Operational capacity has increased 691,000 bbls from May 13, 2016, to March 31. The hub utilized 80.5 percent of capacity week ending March 31, compared to a record level of 80.6 percent. Genscape estimates that maximum usable storage capacity is between 80 and 85 percent.

    NYMEX Light Sweet Crude (WTI) front month prices fell $0.28/bbl to $50.23/bbl in the hour following the April 3 publication of Genscape's Cushing storage report, which showed that stocks increased to record-high levels.

    On April 5, the EIA also reported that Cushing and PADD 3 inventories both rose to record high levels, driving an overall increase in U.S. crude stocks. WTI front month prices fell $0.67/bbl to $51.08 in the hour following the EIA report.

    The increase in crude stocks surprised many market participants, as analysts predicted a drawdown in U.S. crude inventories for week ending March 31, according to various sources. Genscape data provides insight into activity at key storage locations in advance of weekly EIA data.

    Taking it to the Coast

    Inventories in the Gulf Coast and West Texas regions often climb soon after Cushing inventories reach a record high. Texas storage provides an economical option for market participants seeking alternate storage locations when Cushing capacity is limited.

    Stocks in Houston, Beaumont-Nederland, and Corpus Christi, TX, climbed through the winter, up nearly 19 million bbls to the record high above 87 million bbls between December 30, 2016 and March 31. Inventories surpassed the region’s previous record high set March 17 by 1.8 million bbls. Despite the record-high inventory level, only 62 percent of operational capacity was utilized.

    Total capacity before coverage began in 2014 was around 105 million bbls. It is likely that inventories for week ending March 31 were the highest level of all time, assuming a maximum usable storage capacity of 80 to 85 percent.

    Houston stocks increased by 701,000 bbls to 42.5 million bbls week ending March 31, also a record high. Corpus Christi  inventories increased 1.1 million bbls to 13.5 million bbls, 632,000 bbls below the record high set on November 4, 2016. Beaumont-Nederland stocks remained relatively flat, down less than 1,000 bbls to 31.2 million bbls, receding from a record high set week ending March 24.

    West Texas inventories reached a record high of 19.8 million bbls week ending March 17, utilizing 67 percent of capacity. Stocks at the St. James, LA, storage hub climbed 1.3 million bbls to more than 21 million bbls week ending March 31, utilizing 66 percent of capacity.

    Inventories in Texas and Louisiana often increase near the beginning of the calendar year. Barrels typically return to the region after year-end ad valorem taxes incentivize market participants to relocate stocks in December. However, Texas Gulf Coast inventories increased more drastically in recent months than in past years. Stocks posted smaller builds through the first three months of 2015 and 2016, with storage levels up 10.7 million bbls and 10.2 million bbls, respectively, compared to 19 million bbls in 2017.

    Genscape-monitored PADD 3 locations were utilizing 63 percent of operational capacity for week ending March 31. This leaves at least 35 million bbls of available storage capacity which could help accommodate further stockpiling as Cushing inventories test maximum capacity. Genscape will continue to monitor crude stocks in Cushing and the Gulf Coast to increase transparency as the inventory glut develops.

    Genscape's Cushing storage data is collected using infrared cameras, aerial diagnostics, and other proprietary measurement techniques. This approach translates into highly accurate, advance notice of the actual oil storage levels at Cushing. To learn more or request a free trial of Genscape's Cushing Crude Oil Storage Report, please click here.

  • Loan Originations Down Last Year Thanks to Low Property Sales 2 years ago

    According to a survey conducted by the Mortgage Bankers Association, only $490.6 billion of commercial mortgages were originated last year, which was less expected when the year-end estimate was released in February. It's also down 2.7% from the $504 billion of originations in 2015. Still, 2016's total is the third-highest volume of originations ever, after 2007 and 2015.

    The culprit behind the decrease in volume was the 11% drop in property sales volume last year. The MBA has found a very strong correlation between property sales volumes and loan origination volumes. While it's still very early in the year, things don't look good for lending volumes. Property sales volumes were down sharply in January and February.

    "The slowdown in transaction volumes would clearly have an impact" on the volume of originations, explained Jamie Woodwell, Vice President for Commercial Real Estate Research at the MBA. He added that the post-election increase in interest rates had "taken a bit of wind out of the sails of the transactions market."

    Banks and savings institutions were the most active lenders, generating $157.4 billion, or 32% of the loans that were originated during the year. Housing-finance agencies followed, originating $105.8 billion, or 22% of the total. Surprisingly, this was a 22% increase from the previous year. Life insurance companies came in third with $77.5 billion, or 16% of the total, which was equal to the amount originated by CMBS lenders. Life company volumes were down 5% from 2016, while CMBS volumes were down 16%.

    A total of $214.1 billion, or 44% of all loans originated, were written against apartment properties. Office properties backed $97.4 billion, or 20% of the originations, and retail received $57.1 billion (12%). Hotels and industrial properties each backed 6% of the year's total lending volume, while healthcare properties backed 4%.

  • CMBS Delinquency Rate Continues to Climb in March 2 years ago

    The Trepp CMBS Delinquency Rate ascended once again in March, as another slew of loans turned newly
    delinquent last month. The delinquency rate for US commercial real estate loans in CMBS is now 5.37%,
    an increase of six basis points from February. The reading has consistently climbed over the past year as
    loans from 2006 and 2007 have reached their maturity dates and have not been paid off via refinancing. The rate has moved higher in 11 of the last 13 months.

    The rate is now 115 basis points higher than the year-ago level, and 14 basis points higher year-to-date. The reading hit a multi-year low of 4.15% in February 2016. The all-time high was 10.34% in July 2012. Late last year, we noted that "it is hard to see the rate going down anytime in the near future." We still believe that trend will continue until the summer as the "wall of maturities" plays out. The rate should begin to level off or retreat later in 2017.

    View a year-over-year comparison of delinquency rates by property type

    Industrial, retail, and lodging delinquencies helped push the rate higher in March. Delinquency readings for office and multifamily loans fell month-over-month.

  • CRE Lending Stumbles 2 years ago

    Bank share prices rose for the week as investor sentiment stabilized after the market rout in the previous week. Investors reassessed the economic fundamentals as well as the prospects for regulatory reform. Large banks’ shares added 1.3% for the week, while regional bank shares added 1.6%. The 10-year Treasury yield lost 0.4 basis points to yield 2.396%.

    Economic conditions are strong as the Fed is shifting to a somewhat more aggressive stance on interest rates after several years of very accommodative policy. Short-term interest rates are still negative in real (inflation-adjusted) terms, so there is substantial room for additional fed funds rate increases before reaching a neutral level.

    On the regulatory reform side, changes to Dodd-Frank has undoubtedly shifted further out into the future, which was indicated by the House failure to pass the AHCA. How far out in the future will be determined in the coming weeks, as the Trump Administration’s policy agenda continues to takes shape.

    Weekly Trend

    Overall commercial real estate lending growth posted a positive number by slim margins, as two of the major CRE segments produced negative figures. Construction and land development lending fell at a -1.0% annualized rate, reversing the surge in the previous week. Multifamily mortgage lending growth was a solid 15.8%. Commercial mortgages contracted at a -2.4% annual growth rate.


    Total commercial real estate lending growth for the year-to-date fell to 8.2%. The annualized growth rate for construction and land development fell to 11.8%. Multifamily properties’ annualized growth rate for the year-to-date rose to 10.6%. The annualized year-to-date growth rate for commercial mortgages dropped to 6.8%.


  • CMBS Issuance in Q1 Down 34% from Last Year 2 years ago

    The CMBS cash market was busy again last week as $920 million was out for bid between Monday and Friday. A sizable number of short-term block trades appeared in the lot, which made up the lion's share of Tuesday's $400 million in volume. In the past week, cash spreads tightened modestly at the top and bottom of the credit curve, while BBB- spreads came in a few basis points. In tandem with the overall equity rally, BBB- spreads in the CMBX space also recorded impressive tightening. BBB- spreads for CMBX 6 narrowed over 50 basis points, while those for series 7-10 each moved in between 29 and 35 basis points on the week.

    The CMBS sector survived its first full quarter under risk retention regulations as the month of March came to a close. Between issuers rushing to clear out their loan inventories before the mandates took effect in late December and the widespread uncertainty that struck the market, the industry anticipated a thinner issuance pipeline in early 2017. Although no deals were issued in January, 15 private-label CMBS transactions totaling $11.1 billion closed in February and March. This is a 34% decline in volume from the same period one year ago. New issues in 2017 have received very favorable pricing thus far and deal activity is forecast to pick up as market uneasiness continues to subside.   

    Several news outlets reported that Marsh Supermarkets has stopped making rent payments on six of its Indianapolis stores. The decision indicates that the grocery chain may be gearing up for bankruptcy very soon, or could be preparing to scale back some of its physical footprint. Marsh Supermarkets is a major tenant behind 15 CMBS loans, most of which are legacy loans from the 2007 vintage. Based on an article from the Indianapolis Business Journal, one of the locations where the retailer is no longer paying rent for their parcel is the collateral behind the $7.8 million Lafayette Square note. We have created an In the Spotlight page which lists all CMBS loans with Marsh Supermarkets as a top five tenant: Marsh Supermarkets Exposure.

    Earlier this week, specialty department store operator Stage Stores won the bid to acquire over 50 Gordmans locations, which amounts to roughly half of the bankrupt retailer’s total store count. The remaining Gordmans locations are expected to be liquidated.


    Trading and CMBX Spreads

    CMBS Swap Spreads

    Legacy LCF Price and Swap Spread Movement


    Top Credit Stories from the Week

    - Marsh Supermarkets to Close Stores (CGCMT 2014-GC21)

    - Resolution for REO Colorado Mall Could Come Soon (MSC 2006-HQ8) 

    - Trading Alert: Bally's and Resorts Tunica Casinos to Sell for $44 Million (JPMCC 2007-FL1A)

    - Borrower Behind D.C. Office Complex Exploring Payoff Options; Title Likely to Transfer to Trust (BSMS 2006-T24)

  • Six Millennial Trends Changing the Face of Our Cities 2 years ago

    Millennials are flocking to our cities, and profoundly changing the way that metros are designed, and how commercial real estate is built, used and managed. This timely article, authored by upcoming PRISM speaker, Diane K. Danielson, the chief operating officer …

    The post Six Millennial Trends Changing the Face of Our Cities appeared first on EDRnet.

  • Uncertainty Results in Substantial Softening of Property Sales Volumes 2 years ago

    Sales of commercial properties have softened substantially since last year, largely as a result of volatility in the capital markets that suppressed lending activity and concerns over the presidential election. With those issues behind us, some argue that sales volumes should start improving. Many claim that property brokers are seeing a marked increase in requests for brokers' opinions of value- and property-level research, services that generally precede a property owner's decision to market a property for sale. Whether that activity translates into actual sales remains to be seen.

    Prospective buyers and sellers remain far apart in property valuations. To use the industry's parlance, the bid-ask spread remains wide. Sales volumes in January of this year were down sharply, and February’s were down 31% from the year-ago level.

    Prospective buyers are convinced that long-term interest rates, which help determine the value of many long-term assets, will eventually climb higher than they are now. As rates increase, the prices investors can pay for properties must decline in order for them to achieve their targeted returns, assuming all other things remain unchanged. While the majority of folks believe that long-term rates will remain relatively low, most expect they'll be higher than they are today. Investors have also expressed concerns that the current real estate cycle is getting long in the tooth and could be approaching an inflection point. If that's the case, the risk is that whatever they buy today might not be worth as much tomorrow.

    Rather than parking capital in a small number of big-ticket investments, investors are looking for diversification by investing in several properties across various property types and regions. On the contrary, sellers are sticking to their guns. Sellers are looking at recent pricing trends and prospects for economic growth, and arguing that their prices are justified.

    Deals for both buyers and sellers are moving at a torpid rate compared to the pace set a year ago, when the prevailing thought was that the real estate cycle still had a year or two to go.

    But a growing chorus believes that things will work out. Either sellers will ratchet their sales expectations down, or buyers will capitulate. There's plenty of capital being evaluated for commercial real estate, and it eventually has to be invested.

  • Three Reasons Why We’re Excited for RealFocus in 2017! 2 years ago

    Ask anyone who came to RealFocus last year and they’ll tell you there’s a ton of reasons to look forward to the event. While it’s hard to just pick 3 of them, here are some of the top things you can look forward to at this year’s RealFocus:

    1. The Location!

    We’re moving downtown to the Andaz Wall Street, keeping the chic hotel vibe (not your typical conference spot) and expanding – making sure there’s plenty of room for you to bring your team!

    Learn more about our location and reserve your RealFocus spot!


    2. The Agenda!

    A great reason to bring your team is our split-tracked agenda. Starting this year, we’ll be offering even more sessions and panels bringing you the best practices in property operations and compliance.

    We’re thrilled to announce our first agenda speakers today: the team from NYC’s Benchmarking Help Center! They’ll help answer all your questions about complying with the new Benchmarking regulations for your smaller properties. Stay tuned for more exciting agenda announcements, including some fantastic keynotes!


    3. The Fun!

    RealFocus isn’t your typical industry conference – we like to mix in a healthy dose of fun with our industry know-how – so we’re bringing you even more opportunities to have a blast at this year’s gathering. We’re keeping some of the fun a surprise, but tune in later this month for our latest announcement about the agenda item you won’t want to miss. The Countdown Is OnRealFocus 2017 is 5 months away! Make sure you don’t miss out on the property operations event of the year (and our limited-time early bird pricing, disappearing on April 30th). Get your tickets today! Get Tickets Today

    The post Three Reasons Why We’re Excited for RealFocus in 2017! appeared first on SiteCompli.

  • MSA Snapshot: Dallas in High Demand as Commercial Properties Fill Up 2 years ago

    Over the last decade, increased demand has strained core urban assets in major markets such as New York, Miami and Washington, D.C., and has driven investors to emerging “New World Cities.” According to JLL, these are mid-sized markets that “typically excel in high-tech and high-value sectors supported by a robust infrastructure [and] a favorable quality of life.” The Dallas-Fort Worth-Arlington MSA has risen to be one of top property investment markets in this category. This is corroborated by CMBS data, as the Dallas MSA ranks seventh among all market areas in outstanding private-label loan balance, and fourth in total outstanding loan count.

    According to Trepp data, Dallas area properties collateralize about $10.0 billion worth of outstanding US CMBS debt. Office notes contribute the largest portion of that figure with 29.0%, followed by retail (26.4%) and multifamily loans (18.7%). Lodging debt comprises 12.0% of Dallas area CMBS, and industrial notes account for 2.8%. The MSA has a mere 2.6% of outstanding debt in special servicing, a low figure compared to the 5.9% in special servicing for all US private-label CMBS. The majority of Dallas’ specially serviced balance is from the 2006, 2007, and 2011 vintages.

    There was a steep uptick in CMBS issuance for Dallas this past November, thanks to the closing of the single-asset, $452.3 million CityLine State Farm loan. The collateral is an office complex in Richardson, Texas where State Farm Insurance is the largest tenant occupying 93.2%. The office buildings span a combined 2.3 million square feet, and have most recently been appraised for $842.0 million. This loan pushed 2016 private-label CMBS issuance for the Dallas MSA to $1.5 billion for the year. However, that mark still falls below 2014 and 2015 issuance levels of $2.1 billion and $1.8 billion, respectively. Even after picking up in 2013, yearly Dallas MSA issuance has still not touched its pre-crisis high of $5.0 billion in 2007.

    Access an Overview of Dallas MSA Issuance

    There is approximately $2.0 billion of Dallas-backed CMBS debt across 172 loans scheduled to mature throughout the remainder of 2017. Those loans carry a weighted average DSCR of 1.40x. The delinquency rate for those loans is a tidy 1.4%, especially when compared to the overall 4.9% delinquency rate for the wall of maturities coming due in 2017. CMBS loans behind Dallas area properties that are maturing between now and 2021 boast an average occupancy of almost 90%. The upward trend in Dallas occupancy is expected to persist, as the MSA continues to receive heightened demand.