Lender Spotlight: Ameritas

Grady Seldin of PSRS recently spoke with Austin Ward, Commercial Mortgage Asset Manager at Ameritas, asking him a series of questions related to their current program, where they’re winning deals and his thoughts on the current market and rates. The following is a Q&A of the interview:

Where is Ameritas currently winning deals?

As of recently, we’ve been winning deals with long-term fixed-rate mortgages. The last few deals we’ve signed up have been a mix of 15-year terms, a couple 20/20’s, and some 10/30’s on apartment deals. Our multifamily activity has increased drastically once we rolled out our 30yr AM program for stable, moderately levered deals. Currently, our average deal size is $4.3M, which is where we see our sweet spot as a small balance non-recourse lender.  Except for owner-user deals, we are quoting non-recourse across the board which was a regime change in the past 12-18 months. There are only a handful of non-recourse lenders on smaller deals with our attractive, middle-of-the-road pricing.

Where do you see the market and interest rates going in the next couple of months?

The market is extremely competitive. We are a bit unique as we have an in-house equity team across the hall that provides insight into how aggressive the acquisition and equity pool is for acquisitions. That translates well for us as the debt market is going to continue to have a need for commercial mortgages and I have not heard of any life company reducing their allocation. Similarly, we are not slowing down as we look to blow past our 2021 allocation to make up for a slower 2020 production year. As far as rates go, my gut says these low rates are here to stay through 2021.

Have your spreads been steady, or have you had to drop down to win more deals?

We were trying to hold our spreads to 200bps in the last 3-4 weeks as our pipeline has been and still is packed. During that 3–4-week period we didn’t sign up much business, so we have dropped our spreads to an average closer to 185-190 depending on leverage, asset, location, etc. We will go below that for assets we want to win and quote higher than that on retail or office, especially smaller deals but even there we are starting to drop the spread. As our closing team is starting to free up from the wave of Q4 2020 and Q1 2021 business, we will be more aggressive going forward.

What are some interesting, out-of-the-box deals you have completed recently?

In the second half of 2020, we closed a unique retail deal with PSRS that involved a ground lease coming up on a market rate adjustment in 12 years. As such, we provided a 7+5 term with a 12yr AM to provide the borrower to refinance their maturing loan amid a difficult retail environment.

Another unique one was a mid-box retail deal where the borrower wanted to pay off their debt ASAP. The cash flow allowed us to quote a 3yr term on a 3yr AM to refinance a maturing loan and structure a full payoff in short order for the borrower.  The DSCR was slightly above 1% with low leverage and a high debt yield, allowing us to get comfortable.

We have done several owner-user industrial deals for strong tenants/owners based on a review of their financials.

Will you do shorter terms for shorter amortization?

We can quote deals that go shorter than a 10yr term, such as the two deals mentioned previously. This is done by selling bonds to create liquidity for short-term deals. While this is not that common, it is still an option for the right deals. But typically, we are a 10yr or longer lender on a 25yr AM or 30yr AM for multifamily.

What were some of Ameritas numbers from 2020? What have been your smallest and largest deals?

Last year our goal was to put out $375M and ended the year with $290M, so our committee would love for us to pick up the delta this year. We are already sitting at $305M out of our $400M goal for 2021 in April with no limit to blow past that. Our smallest deal was for $850K on a 10/25 retail deal in Denver. Our largest deal was $16.7M for a brand-new industrial asset in Minneapolis.

What is your average close time? Have you ever changed your rate after rate-lock?

Our average close time has been 83 days from application, which is somewhat inflated as we had some deals with forward rate locks above 100 days. Once we get a deal under app and rate locked, I’ve never changed interest rate. There are cases in which we adjust loan dollars based on diligence. This has happened when a large item pops up on the PCA and we can increase the funds to help borrowers cover those expenses.

Could you give us a quick summary of your current program?

• Cost control on smaller deals as we have in-house legal, require a zoning letter versus zoning report, and survey endorsement, limiting the need for a survey on most deals.
• We are unique as we have a small balance program that can quote non-recourse on most deals. We also have a bridge program, construction to perm program, and an equity team along with our commercial mortgage group. This provides the ability to tackle most borrower’s needs.
• Office: Tough unless we are a lower levered (55% or less) and in quality locations with strong demographics. We are primarily sticking to major markets but will do secondary market office with a good story and possibly a credit enhancement.
• Retail: I have had more success with retail on neighborhood centers and strip centers as there is aggressive competition for grocery-anchored centers. The strip centers we are quoting are in great locations with strong demographics where the 1-,3- and 5-mile average household incomes of close to 100k or more.

Feel free to reach out to us with any questions or with any opportunities that you would like to discuss with us!