What bubble? JPMorgan’s CMBS desk doubles down on construction lending

Expansion comes as bank’s commercial division grows cautious

TRD New York /
Dec.December 12, 2016 12:40 PM

JPMorgan’s CMBS trading desk quietly emerged as a major construction lender in Greater New York, taking a leading role in at least $2.7 billion in loans in recent years.

The increased lending activity by the bond group comes as the bank’s commercial banking unit, which usually issues construction loans, is growing more cautious on riskier real estate financing.

JPMorgan’s investment bank is the lead lender on a $1.5 billion construction financing for the American Dream mall in New Jersey, Bloomberg reports. It also issued a $500 million loan in partnership with Oaktree Capital to HFZ Capital TRData LogoTINY to fund the condo conversion of four rental properties. JPMorgan’s CMBS desk also lent $505 million for the Times Square Hotel project.

“They are very careful and conservative in the risks that they are willing to take,” said Peter Sotoloff, of Mack Real Estate Credit, which provided the mezzanine financing for the Times Square Hotel, told Bloomberg.

CMBS lenders don’t normally issue construction loans because they are hard to package into bonds. That helps explain why JPMorgan’s real estate bond trading desk isn’t actually turning its construction loans into bonds, but rather keeps 10 to 40 percent of their value on its books and sells off the rest directly to investors.

“Non-CMBS loans make up a small fraction of our business, but if an opportunity comes along where we can help finance a project for a client in a smart and thoughtful way, we’re going to do it,” a JPMorgan spokesperson told Bloomberg.

The investment bank’s new focus on construction lending comes as commercial banks increasingly pull out of the market amid fears of oversupply, particularly in the hotel and condo markets. [Bloomberg]Konrad Putzier


Related Articles

arrow_forward_ios
American Dream mall

New Jersey’s American Dream mall is a financial nightmare

New Jersey’s American Dream mall is a financial nightmare
Barry Sternlicht (Getty)

Barry Sternlicht predicts “tipping point” for NYC

Barry Sternlicht predicts “tipping point” for NYC
JPMorgan Chase CEO Jamie DImon and 410 Madison Avenue (Getty Images, Google Maps)

JPMorgan Chase closes on $115M buy of Bank of China’s former HQ

JPMorgan Chase closes on $115M buy of Bank of China’s former HQ
Fed Chairman Jerome Powell and Treasury Secretary Steve Mnuchin (Getty)

Politicians want Feds to rescue CMBS market

Politicians want Feds to rescue CMBS market
Beekman Tower at  3 Mitchell Place (Google Maps, Wikipedia Commons)

Beekman Tower loan trouble reveals mystery behind landmark’s owner

Beekman Tower loan trouble reveals mystery behind landmark’s owner
Thomas Barrack and (from top) Sheraton San Jose Hotel in Milpitas, CA; The Westin Governor Morris in Morristown, NJ; Four Points by Sheraton Destin in Fort Walton Beach, FL (Barrack by Jared Siskin/Patrick McMullan via Getty, Google Maps, Westin, Marriott)

Inside the “legacy” hotel assets Colony Capital is pivoting away from

Inside the “legacy” hotel assets Colony Capital is pivoting away from
Hudson Commons and 444 N. Michigan Ave. 

TRD Insights: Can CLOs recover from the pandemic?

TRD Insights: Can CLOs recover from the pandemic?
Hotel operators trek into special servicing and it may take years before they get out (iStock)

Submerged in securities: Many CMBS hospitality loans may be underwater soon

Submerged in securities: Many CMBS hospitality loans may be underwater soon
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...