CMBS Back at the Party

At the height of the recession pretty much the only financing available to apartment developers were government-sponsored enterprises Fannie Mae and Freddie Mac. Since then commercial lending has made a comeback, but just recently commercial mortgage backed securities (CMBS) have started to really heat up. From the Wall Street Journal:

In all, lenders made $94 billion in loans bundled together and sold off as bonds to investors in 2014, the most since 2007 for the product known as commercial mortgage-backed securities, according to trade publication Commercial Mortgage Alert.

Real-estate executives and bankers are predicting that figure will rise in 2015.

That’s good news for some developers.

Growing demand from investors, in turn, has had a magnetic pull on lenders, causing them to pile into the sector. In 2014 there were about 35 active lenders that contributed to CMBS deals, according to Commercial Mortgage Alert. By contrast, there were just 18 in 2011.

As more companies have been jousting to lend, borrowers have been benefiting. Developer Eric Blumenfeld last month secured a $25 million loan for a 205-unit Philadelphia apartment building from an affiliate of Cantor Fitzgerald LP, which then sold it off in a package of commercial mortgage-backed securities. Mr. Blumenfeld said there was more competition among lenders for the loan than he expected and there “was a little bit of a bidding war” before he ultimately went with Cantor, which he had used before.

“Money is more readily available, and for performing assets that have cash flow, there’s a lot of different options,” he said.