to originate its first round of CMBS transactions under a new
platform it launched last year.
At the end of September, the company announced it contributed its first $58 million of collateral in multifamily and retail loans
for an upcoming securitization with Wells Fargo. W&D’s CMBS
platform is on track to contribute $200 million in collateral to
future securitizations by the end of 2014. Meanwhile, its CMBS
originations are likely to accelerate with Walker & Dunlop’s recent
acquisition of Johnson Capital, which has a respectable footprint in
the CMBS market.
The origin of W&D’s CMBS deal is telling, though, for the market. The main reason the firm got into this space was to diversify its
offerings away from its core platform of GSE executions, and in this
respect it appears to have succeeded.
During a recent earnings call, CEO Willy Walker described how
Preparing for the Refi Wave….
the deal came about: “We quoted a three-property, multifamily deal
in June for execution with the GSEs. The borrower requested more
proceeds than an agency loan could provide. So we quoted the
deal for our conduit.”
Then, in the process of quoting the deal for the conduit, the
borrower asked W&D to look at three transitional properties that
needed bridge financing, which also wound up being funded. “A
year ago we would have lost the deal after providing the GSE
quotes,” Walker said. “Today, due to our new CMBS conduit and
scaled balance sheet lending operation, we financed these six prop-
erties, totaling $67 million.”
It is, in other words, how CMBS was meant to operate in the
capital markets: as a complementary backstop when other lending
doesn’t quite fit the borrower’s needs. All courtesy of a new pro-
vider in the market.
These new providers and the solid macroeconomic environment and commercial real estate fundamentals suggest that the
CMBS ecosystem is ready for what is expected to be one of its
biggest challenges post the 2008 financial crisis: refinancing the
$600 billion or so of loans made during 2005-2006 time period.
Certainly this bonanza is one driver for these new entrants. In
September, when the Macquarie Group and Principal Real Estate
Investors announced they were partnering on a new CMBS platform the upcoming wave of refis was cited. “There will be a substantial volume of commercial mortgage loans maturing over the
next few years,” says Timothy Gallagher, New York City-based
managing director and head of commercial real estate markets at
Macquarie. “That provides Macquarie with a sound opportunity
…With New Underwriting Standards in the Background
However, there’s one tiny glitch for some of these hopeful borrowers in waiting: standards have changed considerably since
It’s a CMBS 2.0 world now and besides the statutory changes
to the model, underwriters are not likely to forget the lessons of
2008. Yes, there is more aggressiveness in the underwriting, but
it is nowhere close to previous iterations.
“This is a major issue: a lot of these loans that have been
locked up in CMBS for the past 10 years are looking to refinance out, and there have been a lot of changes,” says Matthew
McGovern, a 20-year industry veteran, who recently joined the
Irvine, CA-based GRS Group as director of its national leadership team.
*Source: MBA 2012
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