The delinquency rate for loans in CMBS securitizations has
dropped to 7.18%. This is with the
backdrop of improving commercial real estate values and an appetite to lend
against the properties in “refinancing”. According to Fitch, this is a three-year low
and a very welcome statistic for our CMBS allocation in the Tradex Global Liquid
Real Estate Portfolio. At the same time,
US economic recovery has brightened the prospects for office blocks and
shopping malls that are used as collateral in the $600 B market for US
commercial mortgage backed securities. This
positive development is in stark contrast to the situation in Europe, where the
default rate on European CMBS has doubled so far this year. The default rate in the US is the lowest since
March 2010, when the effects of the Great Recession were piling the pressure on
borrowers. Fitch also estimates that the
delinquency rate could fall below 7% when the current pipeline of REO (real
estate owned) properties are sold. Our Fund
currently has an approximate 25% allocation to CMBS and we expect that
allocation to rise in the near term. While
Europe is far behind the US in commercial property recovery, we see some of the
best opportunities in Europe and will slowly have a higher exposure to that region.
While we can expect low double-digit
(loss-adjusted) returns in RMBS, we are forecasting mid-to-high teen
(loss-adjusted) returns in the CMBS exposure. We have the expertise of a well-known real
estate PE firm helping our CMBS manager discover the fulcrum security in a CMBS
deal, allowing us to invest in lower rated mezzanine tranches that others
cannot price as well. We believe that all
three strategies in the Tradex Global Liquid Real Estate Portfolio are set up to
deliver a better return than the 12% annualized return investors have enjoyed
over the 3 ½ year track record.
Tradex Global Advisory Services, LLC
investorrelations@thetradexgroup.com
203-863-1500
@Tradex_Global
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