Page 26 —
COLORADO REAL ESTATE JOURNAL
— February 17-March 1, 2016
For Company Profiles, Contact
Information & Links, Please Visit
Commercial Real Estate
Lenders
Directory
COMMERCIAL REAL ESTATE LENDERS DIRECTORY
If you would like to include your firm in this directory,
please contact Jon Stern at 303-623-1148
@
Arbor Commercial Mortgage, LLC
Bank of America Merrill Lynch –
Commercial Real Estate
Bank of Colorado
Bank of the West
Berkadia Commercial
Mortgage, LLC
Bloomfield Capital Partners, LLC
Capital Source
CBRE|Capital Markets
Chase Commercial Term Lending
Colorado Business Bank
Colorado Lending Source
Commerce Bank
Commercial Federal Bank
Essex Financial Group
Fairview Commercial Lending
FirstBank Holding Company
Front Range Bank
Grandbridge Real Estate Capital LLC
Hunt Mortgage Group
JCR Capital
Johnson Capital
JVSC-CBRE Capital Markets
KeyBank N.A., Key Commercial
Mortgage Inc.
Merchants Mortgage and Trust Corp.
Midland States Bank
Montegra Capital Resources,
Private Lender
Mutual of Omaha Bank
NorthMarq Capital, Inc.
RNB Lending Group
TABS
TCF Bank
Terrix Financial Corporation
Trans Lending Corporation
U.S. Bank – Commercial Real Estate
U.S. Bank SBA Division
Vectra Bank Colorado, N.A.
Wells Fargo SBA Lending
Wells Fargo N.A. – Commercial
Real Estate Group
Finance
F
or the first time in 15
years, the 2016 MBA
CREF conference was
held prior to Super Bowl week-
end. The added bonus to being
able to watch it with family is
that the Bron-
cos are in it.
The
Mort-
gage Banking
Association’s
commercial
real
estate
finance con-
ference is the
largest annu-
al gathering
of commer-
cial and mul-
tifamily lend-
ers and mort-
gage bankers.
The tone of the conference was
upbeat albeit concerns surfaced
about economic headwinds and
regulatory changes that could
likely decrease loan volume with
securitized lenders and banks.
On the bright side, life insur-
ance companies have increased
their mortgage and equity allo-
cations by 10 to 20 percent over
last year. The commercial mort-
gage-backed securities industry
originated $100 billion and the
general account insurance com-
panies accounted for approxi-
mately $50 billion (preliminary
estimate) in loan volume, which
ended up close to the estimates
at the beginning of the year.
CMBS loan volume and
the number of originators are
anticipated to decrease in 2016
because of widening spreads,
Regulation AB and Dodd-
Frank going into effect by Jan.
1, 2017. Regulation AB (asset-
backed securities) requires a
senior executive to personally
sign off on a loan pool certify-
ing they have reviewed every
individual loan and are unaware
of any negative aspect that has
not been disclosed. As a result,
several money center banks are
anticipated to pull warehouse
lines fromCMBS originators that
“table fund” loans on these lines
of credit. Many of these types of
CMBS originators are expected
to shut down and not return to
the market in this cycle.
The Dodd-Frank rule requires
that 5 percent of the loan pool is
retained by the loan originator
for the later of five years or when
the pool is paid down by 30 per-
cent. CMBS lenders are antici-
pated to take a more conserva-
tive underwriting approach with
skin in the game vs. the concept
of “the best loan is one that can
be sold.” General underwriting
rules are anticipated to remain or
tighten. Loan pools going tomar-
ket in the second half of the year
could have some loans kicked
out that can’t be sold until 2017.
It is anticipated spreads could
widen another 30-plus basis
points when the risk of a pool
(or kick-out loans) getting sold
in 2017 increases in the second
half of the year. Going back to 80
percent loan to value with five to
10 years interest-only appears to
be 9-year-old history that won’t
repeat itself.
A year ago there were around
a dozen “B piece” bond inves-
tors (first loss positions). The
active number is now down to
eight and four of the eight inves-
tors are buying 75 percent of the
pools. National money center
banks directly originating CMBS
loans and those that are well
capitalized such as subsidiaries
of large hedge funds will likely
create a B piece subsidiary com-
pany to hold the 5 percent. This
would allow these lenders to
have a higher level of closing
certainty in that they can sell
a pool and avoid a third-party
B-piece investor dictating which
loans they want to kick-out of
the pool.
Recent spread widening has
increased the average 10-year
fixed CMBS rate to 5.1 percent at
75 percent maximum LTV with
three years interest only fol-
lowed by a 30-year amortization.
This amortizing loan constant
is 6.44 percent. A life company
loan at 65 percent LTV, 4 percent
interest, 30-year amortization
with an 11 percent mezzanine
loan for the same 75 percent of
proceeds is now at a slightly
lower loan constant.
The CMBS industry still hasn’t
addressed important servic-
ing issues such as timely lease
approvals and leasing capital
releases. The servicing is most
often sold to a third-partymaster
servicer that was not involved
in the origination of the loan.
The combination of widening
CMBS spreads, no improvement
with servicing and the inability
to offer a prepayment penalty
other than yield maintenance or
defeasance will be a problem
for CMBS lenders in 2016 now
that there is a 100 basis point dif-
ferential on the A-note rate for
a general account life company
loan that is serviced by the origi-
nating lender. Considering the
large loan volumes coming due
this year and next year, CMBS
lenders are an important supply
of loans for the deals that don’t
qualify for life company debt.
CMBS has become a large source
of CRE capital and much needed
to maintain the supply of capital.
Life companies are not getting
more aggressive on underwrit-
ing and are generally sticking
to the same rules. The consen-
sus at the conference was they’d
rather compete on rate and pre-
payment flexibility vs. increased
proceeds or interest only. Sev-
eral middle market insurance
companies announced LIBOR
floating-rate programs as low
as 175 over LIBOR at 65 per-
cent LTV. Nothing has changed
with preferred product types in
2016 and preference is roughly
in the following order: 1) high-
clear industrial distribution
warehouse; 2) multifamily; 3)
grocery-anchored retail; 4) cen-
tral business district office; 5)
unanchored infill urban retail; 6)
suburban office; 7) flex; and 8)
flagged hotels.
In general, the GSEs (FNMA,
Freddie Mac, FHA) anticipate
business as usual. Although caps
of $30 billion were set for FNMA
and Freddie in 2015, the govern-
ment changed the rules midway
through the year to exclude any
percentage of affordable units
from the caps. Freddie ended up
doing around $47 billion in total
volume and FNMA did $46 bil-
lion. The same caps are in place
this year with the same afford-
ability ratio excluded from the
cap. FNMA and Freddie 10-year
fixed rates have increased
around 50 bps over the past year.
Insurance companies are antici-
pated to be more competitive
this year on rate and should win
some multifamily market share.
HUD loan volume was down
substantially last year mainly
due to competition with banks.
HUD is trying to streamline their
construction loan (FHA 221 d4)
processing timeline and increase
total loan to cost proceeds from
83 percent to 85 percent in an
effort to gain market share.
Money-center, regional and
local banks were very active in
2015 on value-add deals and
construction financing. The
threshold for nonrecourse and/
or no collateral enhancement
is still approximately 55 to 60
percent LTV. The banks were
very competitive on rate for
value-add deals with partial to
full recourse. The difference on
rate was 200 to 300 basis points
compared to a nonrecourse loan
with a bridge lender. Time will
tell whether value-add inves-
tors will start to become more
adverse to recourse if the eco-
Peter Keepper
Managing principal,
Essex Financial Group,
Denver
An example of the recent spread widening
