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Real Estate Finance and Investment
Cantor: We've Been Lending Through The Volatility
Aug 18, 2011- Graham Bippart
Cantor Commercial Real Estate is quoting new loans in the 5-6% area and has been actively lending despite the current volatility. The company, which originates middle market commercial mortgage-backed securities loans, is finally seeing other lenders return to the lending market, said Michael May, senior managing director. "People are coming back and quoting loans again," he said. "There's a feeling that there is liquidity at a new ceiling in pricing."
Cantor focuses on loans in markets and sectors where other conduit lenders are less active. "Some of our competitors focus primarily on large loans because staffing constraints make it less efficient to do due diligence on loans under $50 million. That's where we are most active," he noted. "We have six offices-in New York, Washington, D.C., Dallas, Chicago, Atlanta and Los Angeles-and relationships in a few other markets like the Pacific Northwest and Florida that allow us to have people on the ground directly where we want to do business."
The firm's last deal had a 22% multifamily concentration, higher than any other CMBS 2.0 deal, and it is continuing to make a claim in that space. "We are unique in our focus on multifamily. We think it enhances the stability and diversity of our deals," May said, adding that more than 30% of the firm's existing inventory is comprised of apartment loans.
Several lenders have stopped making conduit loans in recent weeks, including Starwood Property Group and Citadel Securities. While there has been some speculation that Cantor could also fall victim to the volatility given its fairly recent entrance to the market, May said this would not be the case. "Some of the smaller lenders and recently formed joint ventures may drop out if they don't have sufficient capital hedging abilities. But the bigger firms, like ours, will stay in," he added.
Broadly speaking, Cantor is quoting five-year loans in the 5% to low 6% range, and 10-year loans in the 6% area. "Though spreads increased, Treasury rates dropped by 100 basis points. Borrowers can finance properties with 9% to 11% yields at 5.5% to 6.5%, which is still accretive to their return and favorable compared to historical rates," May said. At least 25% of the firm's business is won on pricing, he added, noting that this is in spite of talk that conduit lenders can't compete with balance sheet lenders in such a volatile market in that regard. "But much of it is won on certainty of execution and relationships. You need to build a reputation of closing, or you won't last long," he said.
Market talk is that Cantor will market a self-led deal this fall. May declined to comment on the deal.DOWNLOAD PDF