Can somebody explain to me how CMBS shops, conduit shops, and balance sheet lending differ as far as the work that is actually done. It seems to me that it should largely be similar analysis as far as analyzing the deal. Thanks!
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CMBS and conduit lending are the same thing, originating loans for securitization. Balance sheet lenders are typically life insurance companies and pension funds. Underwriting process is basically the same, main differences are in deal quality, leverage and loan structure (IO/amortizing, term, guarantees). Balance sheet deals are typically better quality assets in primary/strong secondary markets and have lower leverage (typically less than 65%). CMBS deals are often secondary/tertiary market retail, self-storage, limited service hospitality, etc. with higher leverage, sometimes with cash out, more IO, etc. The exception is very large single-asset or single-borrower transactions that can be very low-leverage with trophy assets. Commercial real estate underwriting analysis is basically the same across all loan types -- you're still diving into borrower/sponsor/guarantor details, market data, property level financials, rent roll, comp set, etc. to verify the deal makes sense.
From the groups within banks that I've looked into, it seems like a lot of the CMBS/conduit lending groups are under Corporate and Investment Banking whereas their balance sheet lending is under commercial banking.
Does this sound like an accurate picture of how they are typically organized?
Within CMBS groups, do the same people who make the loan also package it into the CMBS?
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