(Bloomberg) — Blackstone Inc.’s plans to sell $1.275 billion in bonds backed by commercial real estate debt are now on hold as bond issuance continues to surge.
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A group of banks including Morgan Stanley and Bank of America Corp. were selling a single-asset, single-borrower bond backed by mortgage debt tied to more than 60 industrial properties across 13 states.But the sponsors decided to halt the sales process because spreads on the bond had become too wide, said the people, who asked not to be identified discussing the details as they are private.
The deal was an opportunistic refinancing with no future maturities, one of the people said.
Barclays Plc, Goldman Sachs Group Inc. and JPMorgan Chase & Co. are also working on the bond sale and were scheduled to price the CMBS last week.Fitch Ratings withdrew its expected rating for the bonds on Wednesday after they no longer trade in the market.
Spokespeople for Blackstone, JPMorgan, Goldman Sachs, Barclays, Bank of America and Morgan Stanley declined to comment.
Issuance of commercial mortgage-backed securities has surged so far this year, with total private-label deals worth $42.8 billion, up more than 180% from the same period last year, according to data compiled by Bloomberg News.
Most of that increase came from increased issuance of single-asset, single-borrower deals, and Blackstone has been a leader in this area, refinancing billions of dollars of CMBS debt and accounting for nearly half the market. Overall, such deals tied to specific borrowers account for two-thirds of issuance so far this year, compared with about 40% at the same time last year, according to data compiled by Bloomberg. Blackstone has refinanced about $15 billion of CMBS loans this year, according to people familiar with the matter.
Blackstone's $1.275 billion deal was backed by interest-only mortgages tied to industrial facilities in Minnesota, Georgia, Colorado, Florida, California, Texas, Utah, Nevada, New Jersey, Pennsylvania, New York, North Carolina and Massachusetts, according to a pre-sales report from Fitch Ratings. Proceeds from the loans were to be used to refinance about $714 million in existing debt and to return more than $182 million in equity to Blackstone affiliates, according to the report.
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Risk premiums for commercial real estate debt, including CMBS, have tightened sharply this year after the failure of regional banks in 2023 prompted some to see concerns about the asset class as “overly bearish.”
As of June 7, spreads on newly issued BBB-rated CMBS bonds were 6.65 percentage points over SOFR swaps, down from more than 9 percentage points at the start of the year, according to JPMorgan data.
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