What are the typical loan market sizes that are agreed upon? Or are these markets discussed based on assets? I'm trying to gauge what level the company I'm interning for is going for and what target markets are before I join them next month. It's a LifeCo so I'm assuming it will be Vanilla Core or Core Plus assets but does size count? Commercial properties 1MM-10MM, 10MM-25MM, etc? What are the typical distinctions and what are they referred to as? I tried searching but couldn't find what I was looking for.
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Your question is pretty confusing - are you asking how loan size potentially impacts the risk classification of a loan?
I interned at a national life company on their commercial real estate team and the risk classifications they utilized were Core, Core+, Value Add and Opportunistic (from safest to riskiest) but this was mainly determined by asset oriented risk factors (location of asset, tenant strength, length of lease agreements, etc.), not primarily by investment size.
Investment size relative to overall portfolio is always considered but most investment firms will standardize a range for which they want to operate, i.e. we would like to place money in $5-10MM range for xxx reasons.
I think you understood my question the best. My intent is to understand the loan size intervals that most people agree upon but that seems to be dependent on the portfolio size. I understand that risk is referred to as Core, Core plus, value add, etc. but I'm looking for what are considered like small market, middle market, or large loans by sized of the loan.
I'm not sure that it's a point most people discuss, but here's my rough estimate. It can definitely vary depending on the market/group.
$0-15 million = small balance $15-75 million = middle market $75 million+ = large loan
Thank you this gives me a better idea of what to expect. I wanted to be able to identify what market I might be operating in as well as how to articulate my experience when I'm through.
Most of you guys here work for institutions. Your deal flow is vastly different than what's going on in the trenches. Middle market in Ca is actually $2mil - $5mil and has been for 15 years. There are probably 10x more $3mil loans getting done in Ca than $75mil loans.
Some lenders have max $ to one borrower of $10mil because $10mil is a big loan.
That's very cool, I didn't know that. The company I'm working for only has 7B dollars in CRE mortgages so I imagine there will be more middle market loans like the ones you are referring to in California. It seems that in CRE, risk level is most important and designated by the Core, Core Plus, etc. while the $ loan value is much more variable and dependent on the size of the firm and geographical area.
No, come on. I've seen both sides. I recognize that a lot of CA is mom and pop ownership of smaller buildings, especially in LA, but I don't think middle market is $2-5 mil, especially given valuation these days.
Suggesting a team produces $7B tells me I'm right, lol. $7Bil in production means revenue of $50mil, I'm sure these teams exist but they are not the norm by any standard. There are very few teams that produce even $1B ($7mil in fee income). Like I was saying, so many of you go straight from college to institutions that you never crawl through the mud.
The idea that $15mil to $75mil is mid market is not correct at all.
We can disagree, it's ok. I know every MF broker here in San Diego. The best barely average $5mil per sale. That puts the financing at about $3mil.
For me, I've always considered anything under 10 million to be small balance (regional and bank lending programs), 10-50 million to be the middle (mostly national banks and debt funds) and 50+ million to be large balance (institutional balance sheet /CMBS lending).
I've worked at both a small balance lender and two institutional life companies. The life cos wouldn't touch anything under 20 million and consistently have done 4+ billion a year with average loan sizes of around 100 million (portfolios that were 15b+. The small balance lender had a 6b portfolio with an average loan size of around 1. 5 million. Because of the smaller sizes, those loans also tended to be floaters or shorter term fixed rate, so they were originating around 1b a year to keep up with payoffs.
What you and I are seeing between my background and yours is simply a different experience. Nobody is right or wrong. Life Co's have to do bigger deals because they are not banks. The cost to produce a $5mil loan is the same as a $20mil loan. Life Co's primary biz is insurance but the non real estate folks don't realize that their insurance premiums are simply a source to other revenues (real estate, JV, Loans, etc).
How many insurees know that MetLife and USAA are ballers in JV? None, haha.
Anyway, banks and CU's can't have too much money out to one borrower. Local credit unions can usually only have $15mil to one guarantor. Regional banks cringe at anything over $5mil but claim to have max loans of $10mil.
Union Bank wants loans over $5mil and they make huge concessions to get these deals. But they're Japanese owned and are super conservative. Once they have to lend $8mil to a guy, they want your DNA man. Life Co's different story cause those loans are sold in secondary markets.
Just random thoughts here...
I have no idea what you're trying to ask. I don't mean to be rude but I don't think you understand the lingo yet, so try to ask your question in plain English...
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