“I was recently asked by one of my Commercial Capital Training Group (CCTG) students whether we provided CMBS conduit loans in Canada,” said Michael D. Sneden, Executive Vice President at ValueXpress. “I said we did prior to the market crash, but we haven’t done any since.”
That conversation spurred me to contact a former colleague that originated Canadian CMBS conduit loans in the past to see what he was up to. He said, “I am with one of the few active CMBS conduit lenders in Canada, so let’s do some business.”
The firm is a leader in Canadian real estate debt and equity markets providing conventional commercial loans and mezzanine financing in addition to CMBS conduit loans. The firm has completed a number of CMBS transactions since the restart of the U.S. CMBS securitization market in 2010. Most U.S. investors in CMBS probably do not realize that bond losses in Canada are a fraction of those experienced in the United States, and yet, Canadian CMBS yields are higher than U.S. CMBS yields, attracting savvy investors looking for extra yield with lower risk.
Canadian CMBS conduit loans are structured similar to U.S. CMBS, with a preference for 5-year loan term versus 10 year and lower loan-to-values, preferably in the 60%-65% range.
“After the conversation with my Canadian colleague, I told the CCTG grad, who is based in Toronto, to get his selling shoes on and hit the pavement in search of suitable transactions,” noted Sneden.