Looking at refinancing a >$100mm project, looking for some color on differences between getting debt from a lifeco and getting debt through the CMBS market. Seems like we get a better rate and can get more cash out through CMBS so whats the downside?
Working with debt brokers as well but wanted the WSO take
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LOL if you value the brokers who place debt for a living's opinion so little that you ask WSO for a second opinion why pay them a fee?
Because I'm typically low man on totem pole in most of these meetings and want to be somewhat educated before asking questions. Google doesn't offer a whole lot for using CMBS
Less flexible/longer underwriting process with agency for one. Depending on the agency you may not have the ability to tweak loan docs whatsoever. There are other reasons, but if it is a low rate and cash out you seek, agency debt is your friend.
I'm guessing that the brokers are recommending Life Co debt and the OP wants to figure out why that is when CMBS terms are looking more attractive.
This is a multifaceted answer (CMBS has alot of problems) however the most notable reason at the moment is that you can't rate lock CMBS unless you buy hedges which really suck. Typically CMBS guys will quote you a spread and then the rate will float until a few days before closing. If market spreads (CMBX) swung considerably prior to closing, CMBS lenders would typically attempt to retrade if rates swung too far in the wrong direction and would usually try to argue the rate floor (a good broker would have it lowered) if rates swung in the right direction. Recently the CMBX has been extremely fluid so CMBS lenders aren't even "locking" spreads. Closing a CMBS deal in the current environment is essentially rolling the dice.
TLDR: CMBS execution is unreliable at best and servicing sucks.
Life Cos on the other hand are considered the most reliable in the business and are able to lock rate at application with a relatively smooth execution.
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