5.1.12: Opportunities & Challenges for Portfolio Lenders and CMBS

On May 1st CRE Finance Council sponsored a seminar on the prospects for commercial real estate lending in the near and longer term.  Panelists were a mix of CMBS conduit pros and insurance company lenders; they included Jon Martin from Wells Fargo, representing both a portfolio bank lender and CMBS originator, and Philip McKnight of Easdil Secured, representing the brokerage community that places commercial loans with commercial banks, insurance companies and CMBS shops.

The universal opinion expressed is that insurance companies will continue to capture the choice assets, with interest rates in some cases that begin with a 3, but in most cases in the low 4% range for a 5- to 7-year loan and not much higher for a 10-year deal.  General agreement is that the CMBS conduit loan originators cannot compete at that level; however, the CMBS panelists were quick to point out that the spread gap between insurance company quotes and CMBS is shrinking in 2012, with sub-5% rates on CMBS possible for the right asset.  In addition, general opinion is that CMBS will capture all of the insurance company scraps: higher leverage, tertiary location, older assets and perhaps some less-than-mainstream asset types.  Strong feelings were expressed that there will be lots of this business for conduit lenders.

But not enough to feed all the CMBS origination machines when the conversation turned to underwriting.  The panelists shared concern regarding competition among originators leading toward a slow erosion of underwriting standards.

“As a buyer of CMBS securities for our affiliated bank, Country Bank, I was listening intently,” said Michal D. Sneden, Executive Vice President of ValueXpress. “I need to know when to stop buying new issue CMBS when the underwriting gets out of hand.”

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This entry was posted in CMBS, Commercial Lending, Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress and tagged , , , , . Bookmark the permalink.

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