The market gets solid and competitors want a piece of it.
Competition intensifies. Underwriting gets lax and
observers wring their hands. Lather, rinse, repeat.
Finance & Securitization Review
A funny thing happened as the CMBS market picked itself up after the financial crisis of 2008 and vowed never again. The measures that were put in place to prevent another meltdown—some, admittedly at the insistence of regulators—have helped to usher in a
resurgence in lending and increase in competition.
Take, for example, the documentation now required for a CMBS loan. These guidelines are
much more standardized, says Jordan Ray, managing director of New York City’s Mission
Capital Advisors. Transparency has increased, as was intended, as
well as easier poaching of borrowers, which was not.
“It has made it much easier for conduits to accept other conduits’
loan documents to win business,” Ray says. “The end result is that the
plain vanilla CMBS is now very much a commoditized business and those who want to get deals
done need to do something special.” Besides the usual—interest only terms, floating rate transactions—Ray has seen lenders originate mezzanine loans and keep them on their balance sheet,
as the extra edge. Or offer stronger subordination levels or shorter-term loans.
By Erika Morphy