11.7.09: CMBS Conduit Loans Are Back!

ValueXpress recently partnered with a global investment bank to originate CMBS conduit loans. “CMBS loans have always been a large portion of our loan originations, totaling over $1.2 billion prior to 2008,” explained Michael Sneden, Executive Vice President of ValueXpress. Sneden notes, “When the market for CMBS securities collapsed in 2008, we began purchasing senior investment grade CMBS securities for a client, which allowed us to keep a finger on the pulse of the CMBS securities market, knowing that if and when the prices of the securities improved, then new origination of CMBS conduit loans would become attractive again.” Prices for CMBS securities began to improve dramatically after the U.S. government announced in July 2009 that certain senior investment grade CMBS would qualify for financing under its TALF program. Senior investment grade CMBS securities are now yielding 5.5%-6.5% with high demand from buyers, which gives a simplified indication that new CMBS conduit loans can be profitably originated at 6.5%-7.0%.

Against this backdrop we have begun to originate CMBS conduit loans. Terms are relatively conservative, but are likely to become increasingly competitive as the economy recovers and more CMBS conduit originators return. “This is 1998 all over again, but much worse” Sneden said, referring to the Russian bond crisis and the troubles with Long Term Capital Management. “I have to remind my colleagues when CMBS originations restarted after that market shutdown, we wrote hotel loans at spreads of 350 basis points and coupons of 9%, so 7% is not that bad.”

ValueXpress is providing 5-year, fixed-rate non-recourse CMBS conduit loans in amounts $10 million and higher. Click here for a term sheet outlining our conduit loan programs.


This entry was posted in CMBS, CMBS Conduit Loans, CMBS Securities, Commercial Mortgage-Backed Securities, Michael D. Sneden, Senior Investment-Grade CMBS, The Banker's Mortgage Conduit, Valuexpress. Bookmark the permalink.

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