Real Estate Forum - October 2015

entrant in the US CMBS market had originated, securitized and lead-managed its own deal, the company crowed in a press release at that time. More significantly, these were almost all middle-market loans. That first mortgage pool was collateralized by 38 fixed-rate loans secured by 67 properties in 22 states.

Cantor provides loans of $5 million to

$175 million under its fixed rate-lending
program. Its floating-rate program targets
larger amounts starting at $35 million and
going up to $200 million.

Whether they have their own CMBS platform or not, most lenders in this space do underwrite to an eventual CMBS take-out, Berkadia’s Moczul says.

They have to, if they want to remain competitive.

Yes, even here in the small and middle
market, competition for good deals is
fierce. That may come as a surprise to some
as the space has traditionally been (until
recently) under-served and over-regulated
(that has not changed).

But today the landscape is almost unrec-
ognizable, Moczul observes. “Not only has
the demand for bridge debt increased, the
supply has increased as well,” he says. “In
fact, there is more available capital than
deals to lend on.”
Loan amounts on value-add plays have
increased to nearly 80%, up from 75% a
year ago, according to Moczul. Going-in
debt coverage requirements can be below
1.0, whereas in previous years it’s been at
or above 1.0, he says. And some lenders are
willing to look at deals below $10 million,
when not long ago $15 million to $20 mil-
lion used to be the floor.

Having said all of that, Moczul con-
cludes, middle-market lenders remain
disciplined with their underwriting. “It’s
nothing like the go-go years of 2006 and
2007.”
That’s good, since middle-market bor-
rowers are finding themselves buffeted as
the market becomes more volatile, Jerry
Dunn, the CEO of A10 Capital, says. “We
have been getting a lot more inquiries in
recent months in large part because of the
volatility.”
For example, he offers, A10 Capital has
taken on a number of new clients who were

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”

We have
been getting
a lot more
inquiries in
recent
months in
large part because of the
market volatility.
Oftentimes they are
borrowers abandoned by
their previous lenders late
in the game.”