On a multi-family deal, why would someone choose a cmbs or debt fund loan over a Fannie or Freddie loan? The extra LTV sizing that you'll be able to achieve on an agency loan would seem to greatly outweigh the lower interest rate you might receive from a cmbs lender or debt fund, making the cost of capital much greater to go with a cmbs or debt fund. Would the only real risk just being that you are overleveraged?
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I work in CMBS and I will be the first to admit that agencies are typically the better option than us for multi debt and because of that we dont see as much multi as we used to in the 1.0 days. When I see a multi, I am typically very suspicious of the deal because something is off with the deal if the agencies dont want it. However, there are also reasons why cmbs or bank debt will be an option over agencies. Not every deal is a fit for agencies, example, if there is a high % of income from retail or if there is a massive cash out. Agencies have a box and the deal has to fit within their box. Agencies also have limitations based on their budget. few months ago, they were being very selective before their caps were increased. During that period we saw lots of multi come our way.
You'd go to a debt fund or bank for bridge financing. Possibly you'd choose a bank for permanent debt if flexibility and pre-pay concerns were an issue. Otherwise, agency debt is tough to beat.
Echoing the above, pricing has been the recent incentive. Agencies were unsure where cap requirements were going to shake out a couple months back and blew their pricing out to make themselves less competitive on almost every deal (purposefully quoting horrible spreads in order to lose deals). Reasoning was that they didn't want to keep signing up huge numbers of deals with the regulator in the other room. Now that those levels have evened out a bit, they are back in the market.
Lenders also specialize in certain products. Sometimes Mezz/Pref is needed, and the Agencies aren't really great in those special situations. Further, refinance rates in years of maturity are a huge box for the agencies. Some deals don't size as well just given profile and other metrics the agencies wont UW (think retail tenant with signed lease but is not currently paying rent, or RUBS coming online in the next 6 months). CMBS and Debt Funds have more runway with these assumptions than agencies do.
Everything else that Brody92 mentioned is true. The only thing that I would add is Sponsorship. Agencies won't do deals with specific Sponsors at the structures they are requesting given poor history, legal issues, foreign KP's, so on.
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