CMBS Key to Commercial Mortgage Market Liquidity

The development of commercial mortgage-backed securities financing has changed the financing scene for commercial properties, especially by imparting more liquidity, according to a panel session on "permanent financing" at an International Council of Shopping Centers capital marketplace conference here.

Adam Raboy, co-head of originations, CSFB, noted that in the early 1990s, an insurance company like Prudential wouldn't have made a loan on a grocery-anchored shopping center with seven years left on the loan term.

Simon Ziff, president, The Ackman-Ziff RE Group, said that the biggest insurance companies wouldn't have made have such a loan, but the smaller ones would have, with an additional charge.

The availability of CMBS financing has changed all that by imparting liquidity. And leverage levels are also higher, he noted.

Comparing CMBS and portfolio lenders, Michael J. Mazzei, managing director, Barclays Capital, said that there is always convergence in the capital markets. Insurance companies are also securitizers and buyers of CMBS today.

Generally speaking, the portfolio lender remains the final word when it comes to a loan while the CMBS side has to answer to the market and is very transparent, Mr. Mazzei said.

According to him, a lot of the differences between the financing sources are more "perception than reality," involving people's perceptions of whom they are going to deal with after they close the loan. In this regard, CMBS servicers need to be seen as more "user-friendly," he believes.

And insurance companies have imported some of the "simpler aspects" of CMBS and portfolio lenders sell loans, too, he noted.

Richard Katzenstein, senior managing director, MMA Realty Capital, said that servicers need to be viewed as a friend, not a foe.

Mr. Raboy noted that even in dealing with a portfolio lender, "If you're banking on an individual being there, that's not smart."

Alice Connell, managing director, Teachers Insurance & Annuity Association, agreed that there has been "tremendous convergence" between the portfolio lending and CMBS sides.

TIAA does both conventional lending and CMBS and she believes that borrowers are dealing with a more flexible, responsive lender on the portfolio side.

"Everybody wants more business and the only thing that will give us market share is flexibility and servicing," she said.

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