Construction Loan Deals on the Way?

Construction loans could be making it to the capital markets as early as next year, according to participants at a Realshare structured finance conference in New York.Lisa Pendergast, managing director of CMBS Research at RBS Greenwich Capital, said she knows of at least three Wall Street firms that are "setting up for construction loans." However, "it will be a long time before a traditional conduit lender" gets into this sort of securitization, probably after a market is established, she said. Kim Diamond, a Standard & Poor's managing director, said that "the thought of securitizing construction loans gives me heartburn," considering that it goes against the concept of an asset's being backed by an income-producing property. She believes that there might be interest in this sort of securitization from generalist investors in asset-backed securities who are not aware of the associated risks. Margie Custis, managing director of capital markets at Principal Global Investors, sees securitization of construction loans as a concept that works. All it needs is time for people to figure it out, she said.