10.12.17: CMBS Conduit Loan Originations Up 5%

Through the first three quarters of 2017 CMBS conduit loan originations are up 5%, as measured by CMBS securities issuance. According to Commercial Mortgage Alert, CMBS conduit issuance as of September 30, 2017 totaled $33.8 billion compared with $32.2 billion a year earlier. However, overall CMBS loan origination volume is up a whopping 34% to $66.6 billion when large single-borrower loans are included. Based on this pace, combined CMBS loan originations are on track to easily exceed last year’s $76-billion total.

The strength in new CMBS originations stems from a variety of factors. CMBS issuers are now comfortable with risk-retention rules, having successfully sold CMBS using all three methods of risk retention — vertical, horizontal and L-shaped — without any method having much impact on bond prices. As a result, CMBS bond spreads have been stable, with senior AAA-rated CMBS market spreads holding steady below swaps plus 100 basis points (bp) for lower leverage deals and roughly swaps plus 100 bp for higher leverage deals.

With stable CMBS prices and relatively stable Swap and Treasury rates for most of 2017, borrowers have enjoyed interest rates on CMBS loans in the 4.5%-4.75% range for full-leverage loans and 4.25%-4.5% for low-leverage loans. It is anticipated that these levels of interest rates will remain available for the balance of 2017. Market professionals are forecasting slightly higher rates for 2018 as anticipated short-term rate increases proposed for 2018 by the Federal Reserve are expected to push CMBS conduit loan rates higher next year.

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10.9.17: Discussion Under Way to Improve CMBS Servicing

Industry professionals are recognizing that the long-term appeal of CMBS for commercial real estate finance may be diminished if the borrower experience with loan servicing is poor. Recently, Stacey Berger, an Executive Vice President, and Bob Wright, a Senior Vice President, of Midland Loan Services, a major CMBS loan servicer, wrote a piece on what can be done to improve the CMBS borrower servicing experience.

The authors note that borrowers typically don’t have a choice of servicer for a CMBS conduit loan. CMBS issuers sell the master servicing rights to a select group of bidders and special servicers are selected by the transaction investors. So borrowers cannot select a servicer based on quality of service. Borrower-initiated lender approval requests are one of the most important interactions between the borrower and servicer. These can range from routine to major credit issues, and the servicer’s performance while handling these interactions is a major factor in determining borrower satisfaction. Setting appropriate expectations as well as establishing reasonable time frames and fees is critical to a successful result.

Progress is being made to streamline approval requests. Master servicers can now approve routine borrower requests such as reserve releases and minor lease and budget approvals, while major credit approvals, such as assumptions, change of ownership, or property management changes, are directed to the special servicer for its approval. These recent changes are improving the efficiency of the borrower/servicer interaction.

However, borrowers need to understand that servicers can’t review and approve requests without complete information, which is required to make the decision. Servicers need to be specific about what information borrowers need to provide up front and follow up with the borrower regarding missing information. Effective communication between the servicer and borrower is key to improving the borrower experience for CMBS conduit loans.

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10.4.17: Cash-Out SBA 7(a) Loans Now Available

ValueXpress has partnered with a non-bank SBLC licensed SBA 7(a) lender to originate SBA 7(a) loans nationwide that allow for cash-out proceeds to the borrower for a refinance. The firm has a Preferred Lenders Program (PLP) designation, and therefore, the SBA has delegated credit decisions and servicing to the firm.

Most SBA 7(a) lenders limit cash proceeds to the borrower on a refinance to relatively small amounts of working capital. In the new program, SBA 7(a) loans on a refinance can be up to 75% Loan-to-Value as long as 51% of the loan proceeds is utilized to pay existing debt. The balance of the loan proceeds would be remitted to the borrower.

The loan structure remains the same as any other SBA 7(a) loan. The loan term and amortization is up to 25 years. All SBA 7(a) loans are self-amortizing. The loan is floating rate, based on margin over the prime rate (ranging from 1.0% to 2.75% typically) and adjusts quarterly. The SBA charges the borrower a guaranty fee that can be paid out of the cash-out proceeds. Eligible assets are owner-occupied properties-only in which the owner occupies at least 51% of the property. The prepayment penalty is 5%/3%/1%.

“We expect to do a lot of business cross-selling this product to our existing customer base that owns hotels and self-storage facilities, as these assets are considered owner-occupied by the SBA but are also eligible for CMBS conduit loans,” commented Michael D. Sneden, Executive Vice President at ValueXpress. “ValueXpress has hundreds of clients that have completed cash-out CMBS conduit loans for hotels and self-storage facilities, and we would look to this client base for borrowers seeking cash-out who are not eligible for a CMBS conduit loan.”

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ValueXpress Arranges $8-Million CMBS Conduit Loan for the Refinance of an 87-Room Candlewood Suites in Smyrna (Nashville), TN

ValueXpress has arranged an $8-million CMBS conduit loan for the refinance of a Candlewood Suites constructed in 2015. Located 20 miles southeast of Nashville off I-24 in Smyrna, Tennessee, the property is a 4-story, 87-room, extended-stay, interior-corridor hotel constructed by the sponsors to Candlewood Suites brand standards. The property is located midway between Nashville and Murfreesboro, Tennessee.

Candlewood Suites Smyrna TN

Candlewood Suites, Smyrna, TN

The property offers an outdoor pool, fitness room, lobby workstation, market pantry, Lending Locker, guest laundry and outdoor patio and BBQ area. The Candlewood Suites property is located in proximity to shopping, restaurants, attractions and businesses. The area is home to multiple distribution and logistics centers, including Bridgestone, Firestone, Saks Fifth Avenue, Essex, Cardinal Health, and Saint Thomas Rutherford Hospital. Smyrna is home to the Nissan Vehicle Assembly and Battery Plant, a 6.5-million-square-foot facility that manufactures more than 650,000 Altima, Maxima, LEAF, Rouge, Pathfinder, and Infiniti QX60 vehicles annually.

“The transaction was challenging due to a significant amount of new room supply that opened in the market in the past 24-36 months, including a TownPlace Suites by Marriott and an Uptown Suites,” commented Gary Unkel, Senior Loan Originator at ValueXpress who arranged the transaction. “Moreover, a dual branded Home2 Suites and a Best Western Plus are under construction.”

“I was able to show the market absorbing all the supply and the subject hotel maintaining and improving its RevPAR penetration as well,” said Unkel. “This was imperative to the success of the transaction as the loan proceeds provided a return of cash equity to the sponsor that exceeded his cost basis.”

Posted in CMBS, CMBS Conduit Loans, Commercial Lending, Commercial Mortgage-Backed Securities, Commercial Real Estate Loans, MBA CREF Convention 2011, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress | Tagged , , , , | Leave a comment

9.29.17: Reach Out to Community Banks for CMBS & Non-CMBS Opportunities

ValueXpress is always looking for effective avenues to find borrowers that may be interested in CMBS conduit loans. Until recently, a steady source of CMBS conduit loan originations resulted from refinancing maturing 10-year term CMBS conduit loans closed in 2006-2007 during the height of the CMBS market. You may recall the market for CMBS conduit loan originations in the United States peaked in 2007 at $228 billion, well in excess of the $75-billion annual rate in recent years. Most of the CMBS loans closed in 2007 were structured with 10-year terms, but all have now matured and refinanced.

So new business needs to be found. We are finding some success through the community banking system, in particular community banks that originate income-producing loans in the $3-$15 range for their balance sheet. We have developed relationships throughout the United States with community banks to refer requests to ValueXpress for income-producing loans that don’t fit their lending criteria. These opportunities are mostly requests for non-recourse loans or very large unrestricted cash-outs on refinances. Other opportunities arise from borrowers that reach their legal lending limit at their bank or need to reduce their contingent liabilities related to large amounts of personally guaranteed loans. Taking some or all of these loans into the non-recourse CMBS market opens up capacity for the bank to continue to lend to the customer.

A side benefit we have discovered through this process is how active community bank lenders have become on income-producing commercial loans. Commercial banks have fully recovered from the financial crisis, and with low cost deposits, they are aggressively closing loans at attractive terms. So when we meet with commercial bank loan officers, we share our CMBS product information with them. At the same time, we learn the terms and benefits of their loan programs. While most community banks still only close recourse loans, we find that in certain instances in which a borrower is not concerned about recourse, we can place that loan with a community bank to get the best terms for our client.

 

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9.25.17: ValueXpress Is Refreshing Its Website

ValueXpress is updating its website to incorporate advances in technology since we first launched our website in 2006. The current website has won awards for its graphics and we have updated it piecemeal over time, but it’s time for a complete overhaul.

The refresh will provide a more personalized experience. For example, the images of people currently on our website are stock images. They will be replaced by images of actual ValueXpress professionals. Photographs and background descriptions of each team member will be featured on the “Team” web page. Video clips will be included that feature our team members explaining in their own words the “ValueXpress experience.”

“Many of our clients never get to meet us in person,” commented Michael D. Sneden, Executive Vice President at ValueXpress. “When we provide a photo/video experience on our website, I believe clients will feel more at ease when they speak with us on the telephone. It will facilitate even more comfortable conversations as clients can ‘picture us’ as we discuss their deals.”

We also intend to better organize and present our content. We have completed over 200 transactions of all kinds. They will be organized in such a way that borrowers can quickly and easily find concise descriptions of transactions similar to what they are seeking to do. Our loan programs will be detailed with supporting transactions showing why the transaction benefitted from the selected loan program. Loan rate sheets and market indexes used to set loan rates will be prominent.

Finally, we have been writing for over five years about loan structuring for the benefit of borrowers, pitfalls to avoid, working through servicing issues, ways to streamline the loan processing and closing process, ways to lower transaction costs and a host of other important borrowing issues that can only be learned through 25 years of experience. These articles will be indexed for the benefit of those clients who visit our website.

Posted in CMBS Conduit Loans, CMBS Securities, Commercial Lending, Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress | Tagged , , , | Leave a comment

9.18.17: ValueXpress to Be a Sponsor of the 12th Annual Vishal Bhagat Memorial Golf Tournament

ValueXpress has committed to be a sponsor of the 12th annual Vishal Bhagat Memorial Golf Tournament, which will take place at the NorthShore Country Club in Portland (Corpus Christi), Texas on Friday, November 3, 2017 and Saturday, November 4, 2017. The event is the primary fundraiser for the Vishal Raju Bhagat Foundation, which has raised over $1.4 million for the primary purpose of supporting juvenile diabetes research. The foundation was founded in memory of Vishal Bhagat, who died tragically in a 2006 drowning accident in Corpus Christi. Vishal’s family and friends honor his memory by continuing his noble war against diabetes.

Over the years, funds raised from the event have provided grants to leading juvenile diabetes organizations such as the Juvenile Diabetes Research Foundation, March of Dimes, American Diabetes Foundation, the Miracle Foundation, Driscoll Children’s Hospital and numerous local organizations. To participate in the event or make a donation, please contact Mahavir Bhakta at 361-779-6666.

The schedule of events includes a 4-man Scramble on Friday with awards, cocktails and dinner that evening. Saturday will feature a best-ball golf tournament with a Gala dinner, including awards and cocktails. Prizes will be awarded for Hole in One on all par 3s, Closest to Pin and Long Drive.

Long considered the jewel of the Gulf Coast, North Shore is known for its famous stretch of holes on the back nine (holes 13-16) set against the backdrop of the bay. Built in 1985 by Bruce Devlin and Robert von Hagge, this private course is not particularly long and there are not many trees, but winds often blow 20-40 miles per hour on good days, and the course is filled with bunkers, water hazards, and side-hill lies to challenge golfers.

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