CMBS Lending vs. BS Lending
How different are the two types of lending? (any significant differences in terms of leverage, riskiness, types of properties, loan amount, or others)
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There are vast differences between the two. CMBS deal structures and guidelines are constantly changing, if ever so slightly, based on how the appetite for the previous securitizations were subscribed. From 2010-2011 leverage and coverage started to become more aggressive. Remember also that for the most part BS lenders are going up against the Life Co's on the Class A assets ( 500 MM) rather than CMBS shops. In terms of leverage you will be able to garner a higher LTV from CMBS than BS.
Also, remember that balance sheet lending could mean anything. Could mean a crappy community bank doing tiny deals.
so it's fair to say I would be seeing a lot more interesting deals in CMBS lending than BS lending when not just seeing Class A, low vacancy, credit tenants asset.
CMBS shops only do non-recourse and essentially, at least today, 5 and 10 year deals on stabilized properties. They are intensely more disciplined on pricing by the capital markets.
Portfolio lenders can do everything, including assets that qualify for CMBS execution. They can be less disciplined and win the business they want because they don't have to mark their loans. Often times, they are more focused on relationships. BS lenders also do construction lending and bridge debt. The securitized market used to be able to do bridge loans but CDO's are, well, over.
The real answer to your question is CMBS has a clearly defined bucket on what it will do - you can print off the UW standards from a rating agency - and balance sheet lenders don't. This may make you think that balance sheet lenders can be creative and do more interesting things if they aren't pinned down by the fickleness of the market. Not true. Primarily because the CMBS pays more and top talent goes there, but also structurally in a large bank if you were doing balance sheet lending you would be in the "hotel construction group" or the "regional shopping malls group" with an even narrower bucket than CMBS.
thank you everyone!
CMBS is alot more competitive. Im hearing CMBS quotes at 3.15% for 100m mall deals (okay i saw this one).. Crazy!
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