that CMBS became not only highly price
competitive, but also competitive with noneconomic terms.
David Maki, SVP of North American
Capital at the Chicago-based Heitman,
dates the shift to September of 2012. “CMBS
has become, essentially, a highly competi-
tive channel for borrowers looking for low-
“I think they will give the insurance com-
panies a huge run for their market this
year,” Maki says, “and be very competitive
on high quality deals this year.”
One attraction for low leverage borrow-
ers, Maki points to, is the level of flexibility
CMBS lenders have started offering bor-
rowers on noneconomic terms. Originators
realized they had little choice but to move
in this direction, Maki adds.
Heitman and other institutions stay away
from the product.”
He adds: “CMBS has tried to create a
product that is more like a life product.
They have narrowed it to what is needed for
the basics of securitization.”
Indeed the life sector is clearly feeling
the heat from CMBS, with its competitive
price and newly flexible product structure.
In 2012, “we saw CBMS reemerge as
strong competitor for loans with portfolio
lenders,” Prudential’s Durning says. “Less
so from a profit perspective but definitely
from an underwriting perspective.”
Northmarq’s Stephenson is also bullish
about the prospects for CMBS in 2013. “I
wouldn’t be surprised to see originations
double in 2013 over 2012.” What happened
in 2008, in short, he says, is now a distant
All of this activity is very welcome news,
if only because there is a huge wave of
debt that will be need to be refinanced
this year and next, Stephenson says. And
even the most troubled of those properties have hope, he continues—not just
from the CMBS community, but from
other players as well.
“More and more lenders out there are
offering mezzanine and preferred equity in
order to prop up properties that might be
overleveraged,” he says. “We did a lot more
of that kind of business in 2012 than any
previous year since the crash, and we believe
2013 will be an even bigger year for mezzanine and preferred equity.”
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Commercial Real Estate Finance
Whither the Agencies?
If all this sounds like competition for the
GSEs, that’s because it is. Multifamily properties are the most coveted of assets lenders
want to acquire for their portfolios. The
GSEs, though, can count on plenty of businesses even as their competition steps up.
Both Fannie Mae and Freddie Mac have
been experimenting with their offerings,
rolling out such products as floating-rate
paper, wrapped securities and shorter-term
securitizations. Still, they will focus on their
bread-and-butter for 2013—that is, longer-term debt in the ten-year range.
That is just fine with their competitors.
Stephenson, for example, doesn’t see
agencies increasing their market share.
“From our perspective, the agencies have
flattened out. They are still doing the
majority of multifamily business, but the
competition is getting tougher from CMBS
and life,” he says.
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Where the Products Blur
The red-hot asset class of multifamily is
where many lenders are starting to blur