The Current State of the CMBS Market
The Current State of the CMBS Market
At PSRS, we focus primarily on providing Life Company financing through our correspondent relationships. Life companies provide stellar non-recourse financing, with rate locks at application,terms from Floating Rate to 40 Year Fixed, with minimal to NO reserve structure and loans from $1 million and up.
Sometimes, our clients require financing that may be better suited for lenders outside of life companies. When this situation arises we will often turn to the Commercial Mortgage Backed Securities (CMBS) market to see what is available for our clients. We negotiate the terms, hopefully minimize the amount of reserve accounts and structure, work to prevent any form of re-trades, facilitate the process, close the loan and often times service the debt in-house.
We sat down with Robert Fanto, Managing Director at Rialto Mortgage Finance (CMBS Lender), to discuss what is going on in the world of Commercial Mortgage Backed Securities:
How has the first half of the year gone for Rialto and the CMBS market as a whole?
Rialto is now the largest, non-bank, contributor to securitized loans. This year has been consistently busy, and we have continued to ramp up production, in an effort to meet the demand of maturing CMBS debt. At the start of the year, with risk retention and volatility, we have been able to keep spreads relatively tight, which has helped to drive business.
With concerns over e-commerce, shrinking big box retailers and retail continuing to business as they have historically, what have you done to adapt?
We have the ability to consider tougher deals. While demand for lenders in the marketplace has stayed healthy typically for only grocery-anchored retail centers, we dont necessarily require the center to contain a grocer. We evaluate the strength of the request on market metrics.
How do you see the rest of the year panning out?
Acquisitions are the wild card, if acquisitions pick up, we are going to be extremely busy. The 10-year T has gone up by about 25 basis points over the last few weeks, there may be macro-economic impacts through reform and healthcare, while spreads internally have remained tight, we would urge borrowers to get there requests in over the next 3-4 months to cut out a big jump in treasuries.
Under what circumstances do you see CMBS being the best alternative to borrowers financing needs?
While some deals will call for structure, CMBS can provide for max leverage, non-recourse on not necessarily trophy assets. Often times on lower leverage request (sub 65%) we can provide 10 years of interest only financing. We have been doing a lot of these and expect to do more, as rates go up.
- Non-recourse financing
- Lock rate at application
- Terms – Floating Rate to 40 Year Fixed
- Minimal to no reserve structure
- Current servicing portfolio of $5.5 Billion – Fast servicing decisions
- Nationwide coverage in the US on all commercial and multi-family real estate
- Loan sizes from $1 Million to $100 Million+
Founded in 1972, Pacific Southwest Realty Services (PSRS) is one of the largest privately-held commercial mortgage banking firms in the Western United States. Our funding sources include major life insurance companies, banks, credit companies, CMBS and institutional investors.
Access to diverse capital sources insures a high level of success in arranging commercial real estate loans, apartment loans, mezzanine loans, and equity transactions that our clients have come to expect. Our long-term lending relationships give us greater latitude in solving problems and closing loans in a timely manner. After the loan funds, our experienced, in-house servicing team handles many issues such as assumptions, lease approvals, payoffs, insurance and many other similar matters.