B/S Lending to CMBS Securitization?
I have worked at a large national bank (BofA/JP/Wells) for about 1.5 years in the CRE B/S Lending Group. I was recently offered the opportunity to join the CMBS Securitization team, and I’m looking for some advice on the pros and cons of the decision.
My ultimate goal is to work on the buy side, and I believe B/S lending is a better path to REPE given the institutional client relationships and relevant deal exposure. However, given the recent slowdown in construction and acquisition activity, I’m wondering if it wouldn’t hurt to learn the CMBS capital markets side of the business. Any insight is appreciated, thanks!
CMBS is a rollercoaster. One week you're getting so many deals that you're working 100+ hour weeks and the next you are terrified about potentially losing your job. Many senior CMBS folks find themselves stuck at the end of their tenure. They enjoy the friendships/relationships formed along the way and are accustomed to larger paychecks than they can get at most lending institutions. However they hate the stress and unpredictability of the CMBS market which ends up determining the fate of the deals that they work on and the fate of their careers. Many try to transition into the D/E brokerage/banking space but find a large portion of their skill set to be inapplicable. As of the last 5 years, the trend has been to transition to Debt Funds. This has seemed to be a good landing spot due to more insulation to market volatility, large skill set overlap and potential to make very large paychecks. However, Covid blew many debt funds out of the water.
This is a good response and so true of the last 6 month or so (and reminds me back to the end of '15/early '16). It's hard to understand what exit opportunities look like at the mid level while the market is wonky right now.
any examples? by blown out of the water, specifically, you mean bad loans (hotels and retail?) and probably won't be able to raise money again and are cutting headcount?
Combination of bad loans and unfavorable capital markets conditions. CLOs were the primary vehicle for many debt funds to keep rates low and for them to do large volume. CLO markets are starting to come back but are not nearly what they used to be pre-Covid.
ohh wow this is interesting. i knew CLOs were big for junky corporate debt issuance but had no clue there was CRE debt in CLOs. honestly probably better that we hit the covid speed bump before the 'creative debt' space got out of control again.
do debt funds issue CLOs and use the capital raised to invest in CRE?
Yes. Think of it as being similar to CMBS. Selling off the "A" piece and retaining the "B" piece.
Can you describe the difference in pay between balance sheet lenders and CMBS lenders at the Analyst-VP level?
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