CMBS conduit lenders are aggressively cutting loan spreads and loosening loan structure to win business amid a shortage of good-quality CMBS conduit loans. For the better part of a year, most CMBS conduit lenders are bidding low-leverage large loans at breakeven spreads in order be able to contribute more profitable smaller loans at wider spreads. One veteran CMBS lender commented recently, “The CMBS market has continued to perform and demand remains high for fixed rate loans. Particularly on lower leverage assets, we are closing loans well below our breakeven numbers in order to facilitate production of more profitable loans that have a bit more story/structure to them.”
Now lower loan spreads and looser structure can be obtained on small balance ($3 million-$15million) deals. “We recently had a client request we obtain CMBS conduit loan offers from our top three CMBS lending partners for the refinance of a top performing limited service hotel in a strong market. The loan request was $7 million/70% LTV with cash-out proceeds to the owner. All bankers bid the deal aggressively,” commented Michael Sneden, Executive Vice President at ValueXpress. “But then, upon learning they would not win, the bankers continuously rebid the spread downward 20 basis points, allowing us to secure a great rate for the client.”
“We are able to provide very attractive rates for our clients in this competitive lending environment because we maintain strong relationships with all the CMBS lenders,” commented Dennis Suh, Senior Vice President at ValueXpress. “We built these relationships by delivering $2.5 billion of quality CMBS conduit loans over 20 years. We bring the benefits of these long-term relationships to each of our clients, as demonstrated by the results mentioned above.”
To obtain competitive proposals for your next CMBS conduit loan, contact Mike Sneden at firstname.lastname@example.org or Dennis Suh at email@example.com.
Toys “R” Us filed a motion today in bankruptcy court to liquidate inventory and close all its stores. The retailer had filed for Chapter 11 bankruptcy in September 2017, resulting from vendors demanding cash payments in advance of merchandise shipments. At the time of the filing, the company struggled under a debt burden in excess of $5.0 billion, partially fueled by a $7.5-billion leveraged buyout executed in 2005. The bankruptcy filing became an immediate necessity as Toys “R” Us worked to build up inventory and continue operations going into the holiday season.
With the pending liquidation of the entire U.S. store portfolio looming, Kroll Bond Rating Agency (KBRA) re-examined its $537-billion coverage of 840 CMBS transactions to identify loan exposure to Toys “R” Us closures. KBRA identified 111 loans ($4.9 billion) secured by 234 properties with exposure to Toys “R” Us or Babies “R” Us. The largest individual exposure remains within the TRU 2016-TOYS transaction, a $494.5-million, single-borrower deal secured by 123 Toys “R” Us and Babies “R” Us; most of the stores secured by the loan are owned by Toys “R” Us.
Of most concern in terms of potential loan defaults are loans secured by properties that feature Toys “R” Us or Babies “R” Us as a tenant accounting for 50% of GLA or greater. Of the 111 loans within the Toys “R” Us cohort, 3 ($36.2 million) are secured by properties that are leased to the store as a single tenant, while 13 loans ($144.0 million) are secured by properties with Toys “R” Us or Babies “R” Us leases accounting for 50% or more of the GLA. These loans are at high risk of default once lease payments on the stores securing these loans cease.
ValueXpress is passing through to borrowers a pricing special effective on Freddie Mac Small Balance Loans (SBL). Applications for the purchase or refinance of multifamily properties with special pricing begin March 15, 2018. Borrowers will receive a 10-basis-point reduction from published rates across the board – all loan products and all markets. The reduction is expected to be available until April 15.
The Freddie Mac SBL program is designed for borrowers purchasing or refinancing smaller multifamily properties. The nationwide SBL program offers highly-competitive terms and a streamlined execution that gets you to the closing table fast, often in under 30 days. The program offer low fixed transaction costs for loan amount between $1 million-$6 million. Loans are non-recourse and 80% loan-to-value is available in most markets.
In the event the multifamily property does not qualify for Freddie Mac SBL execution, the transaction can still be completed at competitive terms through ValueXpress’s fixed-fee CMBS conduit lending program.
To obtain a competitive proposal for your next multifamily deal, contact Mike Sneden at firstname.lastname@example.org or Dennis Suh at email@example.com. Click here for the Freddie Mac SBL program flyer.
ValueXpress has arranged a $3-million commercial real estate loan through its affiliated bank, Country Bank, for the refinance of a 7,000-square-foot, single-story retail building located on Linden Street in Brooklyn, New York. The proceeds of the loan retired an SBA 504 loan and provide a $1.9-million return of equity to the sponsor.
Linden Street, Brooklyn, NY
The property is one of six vintage clothing stores owned by the borrower. The company deals in the sale of previously used clothing, footwear and toys. Items are purchased by the pound, and items in good condition are resold in the owner’s vintage clothing stores in the N.Y. metro area, including the subject store. The balance is exported, primarily to Guatemala. The loan was structured with a five-year term deal with one renewal option for an additional five-year period.
The loan was originated by Gary Unkel, a senior loan originator at ValueXpress. The borrower, a long-time client of Unkel’s, has completed roughly ten transactions over the past ten years with ValueXpress.
Posted in Commercial Lending, Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, SBA 504, The Banker's Mortgage Conduit, Valuexpress
Tagged Brooklyn NY real estate loan, Gary Unkel, Linden St Brooklyn NY, real estate finance, real estate loans
Loan-to-value (LTV) levels for CMBS conduit loans have dropped over the past two years due to a variety of factors, including the implementation of risk-retention rules and picky buyers of subordinate CMBS securities (known as b-buyers) that prefer lower leverage CMBS transactions that are perceived to be less risky. The weighted average LTV ratios for CMBS transactions decreased from 64.1% in 2015 to 60% in 2016 and to 57.5% last year.
But the tighter credit-quality standards that are presumably behind lower LTVs are now crimping the ability of CMBS conduit lenders to generate sufficient supply of loans for new CMBS issues. Plus, subordinate CMBS buyers have a lot of capital to deploy and to a degree have themselves to blame for crimping new bonds for themselves to buy.
CMBS lenders are now considering increasing LTVs to generate more loans. B-buyers are also on board. “We are not afraid of 75% LTV CMBS loans, just structure them properly,” commented one b-buyer. “75% LTV loans structured with no or moderate levels of interest-only payment periods and that contain appropriate reserves and cash management provisions in the event of poor performance are fine with us.”
This new attitude toward leverage should improve loan flow. “We have always been a proceeds-driven loan product and it will be helpful to get back to our roots,” commented one CMBS professional.
Posted in CMBS, CMBS Conduit Loans, Commercial Lending, Commercial Mortgage-Backed Securities, Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress
Tagged b-buyers, finance, LTV, real estate loans
We at ValueXpress have a niche business in the SBA 504 program. We assist our clients in the purchase of generally mid-scale hotels such as Hampton Inn and Holiday Inn Express brands using the SBA 504 program.
Why use the SBA 504 program over CMBS, our bread and butter, for a mid-scale hotel purchase? The answer lies in leverage. The SBA 504 program allows for 85% loan to value (LTV), while CMBS conduit loans for hotels are generally limited to 70%. As long as buyers are comfortable with full recourse (versus non-recourse for CMBS conduit loans), buyers can purchase a hotel with much less equity than required for a CMBS conduit loan.
“Often buyers of hotels under $10 million are challenged to come up with the $3 million of equity required for a hotel purchase,” said Michael D. Sneden, Executive Vice President of ValueXpress. “The SBA 504 program, which would only require $1.5 million of equity for the same $10-million purchase, is a perfect fit for our clients.”
Posted in CMBS, CMBS Conduit Loans, Commercial Lending, Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, SBA, SBA 504, SBA Loan Processing, SBA Loans, The Banker's Mortgage Conduit, Valuexpress
Even food stores thought to be immune from the threat of Amazon are at risk. N.Y. supermarket chain Tops Markets filed for bankruptcy citing an unsustainable debt load, falling food prices and stiff competition from Amazon.com and other low-cost rivals forcing the supermarket chain to reorganize.
Tops said it expects the 169 stores it operates in upstate New York, Pennsylvania and Vermont to remain open while it restructures under Chapter 11 of the U.S. bankruptcy code in White Plains, New York. The chain has arranged for $265 million of financing while it completes the reorganization process.
The chain was founded by Armand Castellani in the 1920s, and the chain consisted of 15 franchise stores in 1962. By 1991, the chain has grown to 145 stores and was purchased by Ahold, a major international food retailer based in the Netherlands. In 2007, a private equity arm of Morgan Stanley purchased Tops Markets. During and after the Great Recession, the chain struggled, exiting 46 locations in Northeast Ohio. During 2012-2014, a number of stores in New York were downsized as the chain continued to struggle under $720 million of debt from the Morgan Stanley purchase.
ValueXpress Arranges $3.85-Million CMBS Conduit Loan for the Refinance
Posted in Commercial Lending, Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress
Tagged Ahold, Amazon threat to food stores, Armand Castellani, food stores, Morgan Stanley, Tops Markets