Financiers stranded as new cycle of CMBS deals kicks off

Lenders and investors have been left high-and-dry with CMBS 3.0, the latest cycle of commercial mortgage-backed securities transactions arranged since August, as tightening credit narrows the pipeline for investments, reported.

“We had a lot of fast money buying these securities, and when they saw a better opportunity, they took it,” said Joseph Franzetti, senior vice president at Berkadia Commercial Mortgage, comparing the situation to the fickle world of romance. “And like a person who found a better date, they left you standing by yourself.”

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Christopher Reilly, managing director at UBS Securities, attributed much of the reduction in purchasing to the uncertainty in the stock market caused by the Standard & Poor’s downgrade of the US credit rating and the removal of $1.5 billion in CMBS from the market due to a change in criteria this summer.

“The pipeline was $10 [billion] to $12 billion and is down to $2 billion to $4 billion,” he said, adding that UBS is aiming to underwrite strong assets like Trinity Center at 111 Broadway.

“We will look at deals that are higher leverage and lower coverage, but are securitized at much lower levels so we can take down the mezz and sell it,” he said. []

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