A panel of diversified lenders at ULI’s Spring Meeting in Charlotte described a healthy mortgage market in which only the long shots are having trouble finding funding these days. The panelists said they are active in most major markets – and even many mid-majors. But they each tend to look at potential deals a bit differently.
For Glenn Grimaldi of HSBC, for example, it’s not the market that’s key so much as it is the borrower. “We follow the best sponsors,” the HSBC vice president of national loan production said. “If the sponsor wants to be there, so do we.” On the other hand, Kevin Pivnick, who is head of conduit loan originations at Deutsche Bank, is “more focused on the real estate,” while David Clark, senior vice president of real estate at Northwestern Mutual Life Insurance, looks at the quality of the underlying property as well as the market that supports it.
In a session titled “Full Court Press on Commercial/Apartment Debt,” moderator Simon Ziff, president of Ackman-Ziff Real Estate Group, followed the basketball analogy by asking each participant to describe what they considered their “slam-dunk” deal. Both Grimaldi and Clark said it would be one in which the borrower had no other choice. But Pivnick said there are no uncontested layups. “Every deal is tough, every deal is extremely challenging,” he said. “If one aspect is easy, then another is difficult.” Pivnick, whose company originates commercial mortgage-backed securities (CMBS) loans nationwide and has led that market for the past half-dozen years, said Deutsche Bank’s “bread-and-butter” deals are those that have “strong story” that are fairly easy to rationalize.
HSBC, on the other hand, is more comfortable with properties with stable cash flows – “perhaps a bridge loan that can be transitioned over the next two or three years,” said Grimaldi. Northwestern Mutual’s comfort range is a permanent loan on a regional shopping mall. The life company did ten mall loans last year, according to Clark, and it has more on its plate for 2012.
When it comes to three-point range, though, the three panelists prefer to pass rather than shoot. While it’s not an immediate “no” at Deutsche bank, Pivnick’s team usually won’t work with long shots. And Clark agreed. “It’s not really in our specific zone of expertise,” he said.
All three lenders agreed, though, that overall, the financing sector is alive and kicking again, all benefitting, as Grimaldi pointed out, from the current low interest rate environment. “New business as well as legacy loans are all being kept alive by low rates,” he said. “We’re very happy to have the market back again,” said Pivnick, who told the standing-room-only session that CMBS lenders are waiting for more demand. “There’s enough debt for everybody out there to take care of demand for the next five years,” added Clark. “The volumes for life companies are at record levels.”