Two Agency Lenders for sale
I’ve seen in the Commercial Mortgage Alert lately that two different agency lenders (Lument and BWE) are both at least rumored to be up for sale. Why the sudden trend? This comes right after a couple of sales of DUS licenses as well. Who do you all think could be potential buyers? To me the most logical answer seems to be a big bank, but considering how that has panned out for Grandbridge/Truist so far maybe that doesn’t make as much sense as I had thought?
CBRE, especially after their earnings report
They already have a DUS License
So? CBRE has $2bn of cash its sitting on, plus consolidation even at the DUS level will be inevitable in the near future.
If not a DUS firm, and CBRE continues to sit on cash, they're fixing to acquire someone sometime soon.
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There are very few licenses that go up for sale as they are owned by publicly traded companies and well integrated within their ecosystem. This scarcity increases the value as Fannie/Freddie have not printed any new licenses since Basis (which is also exploring a sale). There is always speculation about a bank in the mix from BofA to US Bank. We just saw Fifth Third buy a Fannie license (and they own a part of BWE). In some ways it would make sense to consolidate those licenses but at what price?
These licenses for a bank make a ton of sense as it is ancillary fee revenue. When you are pricing construction/balance sheet loans at historical lows the ability to layer in an agency/life co execution makes management sleep at night for that going-in low ROE. However, banks hate commission sales people and commission sales people hate banks and their regulations. The whole industry is a conflict of interest! So if you want to pay $1 Billion for Lument, you have to expect a lot of originators are going to jump ship so what are you really getting and what is that worth?
Keep in mind the Truist/Grandbridge drama has nothing to do with buying Grandbridge. It was a merger with BB&T that owned Grandbridge. It was the attempt at integration that unraveled that platform.
I see a bank overpaying for Basis as there is just nothing there but a few loans and a license. And I see a KKR/Blackstone/Starwood (insert large Private Equity player) making a run at Lument. Which everyone will tout as amazing if it happens but PE all think they are smarter than everyone else in the room so it'll be a learning curve because getting financed with the agencies and actually doing the financing are two ENTIRELY separate things.
Let's grab the popcorn and watch it all unfold!
Agreed that most commissioned sales people would love the freedom at a non bank (though that freedom can also result in fraud as we have seen in the last few years) and their income potential might be capped at a bank but what a bank can offer in return is stability and a base pay. When you cover Blackstone, Brookfield, KKR, Bridge, etc, they call you instead of you calling them. They call you because the bank has an extensive balance sheet and just overall CRE exposure with them. Agencies bend over backwards and given them the best terms. So from the bank's perspective, a base pay + bonus (which adds up to a pretty good overall comp) compensation structure is fair. And this seems to be working. In the last year, a bank was able to be a top 3 Fannie lender and their combined Freddie & Fannie production more than doubled compared to the previous year.
True good point this bank you mention that is now top 5 agency lender is probably the beacon of credit integrity and has certainly never made billion dollar fraud settlements
What are your thoughts on a smaller regional bank getting into the DUS business through buying an available license. Seems like there might be some advantages to being more nimble in the space, and being something that the big banks are not.
That's kind of a grey space IMO. All DUS lenders are subject to the same seller/servicer guide. Sure there's difference in how each shop handles delegated matters, but I'm not sure some regional is going to be more nimble than CBRE, W&D, et all.
Bank's want DUS to retain their construction book once it flips to perm. I'm sure regionals have a different charm when compared to the likes of Citi/Wells, but the non-banks will often be more nimble b/c agency is really their core buisness.
How did Basis get a license in the first place? I've heard horrendous things about working with them. They never originated an agency loan in the 4 years they had a license. Very fishy.
I’ve always wondered about comp for agency producers at banks. Balance sheet lenders probably top out at 400-500k but agency producers are used to being paid much more.
I am not confident you will see a regional bank take Lument or BWE down. Maybe a JV. The price tag is probably too large as a percentage of a regional bank market cap.
Basis got their agency license during the Biden administration. FHFA is wildly political and priorities always shift. Hence why I believe any talk of "going public" will be talk until someone can assure investors that the next president won't throttle Fannie/Freddie.
I cannot speak to all banks, but I think a good bank agency originator probably tops out around the same comp as a balance sheet lender ($400k-$500k). You tend to find banks that "grow their own" or hire young third bananas from other teams. They are cheaper, do not have non-competes/non-solicitations and have a handful of solid contacts. They are competent enough to navigate the bank stuff.
If you are at a bank, doing direct business, and are hungry enough they tend to leave the bank to go on commission (assuming you can find a home that isn't covering your client base). And I'm sure some people have some grandfathered commission schedule. Compensation is highly negotiated and individualized. Talent always comes with a price.
Roundabout way of saying Basis was given $150 million from Biden because they have a black woman as a cofounder.
Only $150mm? She probably flipped that thing for a billion. Pretty good day at the office.
Sold for between $150MM-$200MM to Zion in an undisclosed transaction.
How do you know the price if its an undisclosed transaction?
Basie and Homestreet, I believe, sold. Zion and 5th/3rd from what I heard.
Lument has not sold, from what I heard, banks are taking a look, but the $1B price tag is a bit above what they want to spend. Lument, I think, is selling both licenses and does a decent amount of placement for HUD deals, meaning they originate somewhere else; they are basically a middleman placing the GNMA into the market.
The only current DUS lender that might look would be Colliers, as they only have the DUS license, but it's a 25-35MM for each license, so it would be expensive to absorb a second DUS, plus Fannie won't approve the sale if they are losing a license right now.
Producers top out at 400K-500K base maybe but big teams those top 25-30 teams that do like 80% of the direct non IS side, they make a 50/50 or 60/40 split on fee's, premium, s rights. So in a good year probably more like 4-5x the base
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