Have recently been very interested in careers in CMBS related roles. I’ve seen a number of threads comparing CMBS to balance sheet, exit ops, etc but haven’t seen a discussion on which firms are the best to work for from a deal flow and junior experience perspective.
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Goldman has the best team. They grind though
Are the teams based out of NY or Dallas? I’ve seen them on a ton of large conduit and Sasb deals so definitely believe they’re getting crushed.
I’m referring to the NY team. I’m sure they may have people in Dallas or on the west coast as well
What makes you say this? Doesnt Citi do the most CMBS?
Citi has a much larger staff. I don’t know what the volumes were the last few years but volume/deal flow/ exits are why I’d say Goldman has the best team. Also highest pay for juniors on cmbs
Citi has dominated volume over the past ~5 years
Best teams are JPM, Wells, Goldman, Citi, and Deutsche. Basing this off who does the biggest deals. Probably some I missed, but these are the most common names you see.
How does Morgan Stanley compete?
Morgan Stanley was 7th in the league tables in 2024, with $8.32B of issuance ($2.5B of conduit and $5.3B of SASB)
Any difference in working in conduit vs sasb and what shops dominate in each? Also curious how the non bank originators compete and what the junior experience is like.
Different deals - SASB will be the larger loans and sexier assets. Conduit is just a machine that pumps out money.
the conduit CMBS originators (sales) guys can really ton it - but only if you produce. Director at WF in originations can clear $800-$1.2MM in a great year.
That’s actually pretty good comp wise. If directors make that much in a good year then the MDs are probably raking in a ton especially given that you could count all the MDs on one hand on the conduit side
non-bank originators at the mortgage REITs like Starwood can ton it if they produce. many of the non-bank lenders originate and loan sell AND also buy B-Pieces. Its a strategy that many non-bank lenders are currently using - 3650REIT, Argentic, Starwood
This is key. Having the B piece sold internally makes CMBS at those shops so much easier
That's exactly right - those shops can then originate tougher loans and limit the distribution risk because they will buy the B-piece themselves. Thereby they can balance the economics of the arbitrage (gain-on-sale) with the economics of the B-piece which can have bond equivalent yields in the 20%-range. Win-Win
Can you elaborate on the economics in the arbitrage and the b piece?
yeah for sure. So loan sellers make money based on the amount of loan spread over the UST relative to what bond yields are at any given moment. In general, the loan coupons are higher than all in bond yields, even when factoring in all the fees of tranching and securitizing.
Ultimately, there are 3 rating agencies per conduit CMBS pool, Fitch being the most important. The goal is to tranche as many AAA securities as possible as those require the least amount of yield to investors, thereby maximizing the arbitrage and profit. Tougher loans get hit with higher Expected Losses from the rating agencies, thereby meaning that specific loan has few AAA bonds and more AA/A/BBB and below IG bonds to sell (each of which has to come with higher yields to bond investors).
The B-Piece buyer typically gets all the Below IG bonds or roughly 8-10% of the bottom stack of tranches at 16-24% bond equivalent yield. The B-Buyers that are also loan sellers (Argentic, 3650REIT, Starwood, etc.), will sometimes get aggressive on really good loans (so smaller loan spreads and lower overall loan coupons) or they will do tougher loans that will have higher Rating Agency Expected Losses (thereby having worse AAA execution and more bonds for that loan being AA/A/BBB and Below IG), because they don't have execution risk - because they are also a B-Buyer and can move the loans in the pool where they buy the B-Piece. This strategy works because they make up for the lack of arbitrage loan selling with the B-Piece Yield being high. The strategy can of course backfire if a tougher loan takes a material loss in year 1-3.
This guy securitizes
Starwood Mortgage Capital has an excellent WLB and makes great money. Goldmans CMBS desk in NYC is all on the IB side and they work like literal rats... but I'm sure they get big bonuses and free ubers home at midnight
+1 for SMC. I may be giving them too much credit on behalf of my contact there, but they’re my favorite group to work through. Incredibly transparent & diligent w/ their b-piece team. All the big bank cmbs teams I’ve interacted with act like their shit doesn’t stink.
Echoing this. I have never worried about execution risk on any of the deals I've done with SMC. Super likeable group too, whatever that's worth in this day and age.
you are all correct about Starwood, they are very legit. However, they have lost a lot of people near the top in the past ~3 years. I know 2024 was a big time year but not sure about the specifics in 2023.
One with balance sheet or other products under same team.
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