All Forum Posts by: Dushyant Ravi

Great post Cassandra. I am a CMBS lender and two thirds of our business are from brokers, I love it when brokers are very detail oriented like you and get us a T-12, rent roll and historicals. The more info the broker gives us, the quicker I can size it up and get you a quote.

Always require a phase 1, if you are using debt, the lender will require a phase 1 anyways. 

In commercial real estate, the product type is generally called industrial. Sub types are manufacturing warehouses, distribution centers, flex/R&D facilities. Industrial along with multifamily has been the best performing CRE product type by far in the last decade. I worked on Blackstone's acquisition of Gramercy, one of the largest industrial REITS and underwrote 95 industrial assets as part of the transaction. Investors are very bullish on the product types as the market forces are favoring it. Access to highways, clearing heights &loading docks, ESFR sprinklers, and above all tenancy is critical. Blackstone's transaction included a lot of single tenant Amazon warehouses, those are as safe as it gets due to investment grade status of the tenant. But, I have also financed a single tenant industrial building where a candle manufacuturing company was the tenant. This was one of the largest companies in the space with a 100 year old history and its customers included Walmart and it was still a tough transaction because of the single tenancy risk and the lease was rolling prior to LED, at that point it becomes a business loan as opposed to a real estate loan. Also pay attention to how much TI/LC's are generally given to industrial tenants in your market and what is the downtime once a tenant vacates. That will indicate the strength of the market.

I agree that CMBS is a good fit for properties that need bigger loan amounts. My average loan amount is $35MM. I will always tell my borrowers that CMBS has pros and cons and its only a fit for borrowers that has a particular business plan. And even with the decrease in market share now to 15% from as high as 50%, CMBS is still an an option and has not disappeared completely because of the lack of financing sources that offer a 10 year loan term, fixed rate, 30 year amort, non recourse (which is huge) and certain interest only periods (which is also a trademark CMBS feature) and also CMBS is willing to lend in secondary and even tertiary markets. If there are enough financing sources offering those terms for product types like hotels (which many balance sheet lenders steer away from) particularly at the $20MM+ tier, then CMBS will not exist. For borrowers that need small loan amounts ($1.5MM or so), a small balance CMBS loan will be a fit where the closing costs are capped.

My previous post was deleted due to self promotion. So, I will make this clear. CMBS is a very homogeneous product. Sometimes, there can literally be no difference in structure and/or rate between two CMBS lenders. So, the below applies in general to CMBS structure, not just to my bank.

Chiming in from a CMBS perspective as it is one of the biggest providers of long term debt. While some banks might charge more in coupon for 10 year fixed vs 5 or 7 year fixed, for CMBS it is flipped. The 10 year fixed is cheaper than a 5 or 7 year fixed. In terms of amortization, CMBS can offer 30 years for all product types (including single tenant retail). For hotels, 25 year amort is slowly becoming the norm though 30 years is still possible depending on the flag. In my experience, while a multitude of scenarios are often presented, borrowers typically chose a product based on their business plan. Some risk averse borrowers who would rather pay down debt faster would even chose 20 or 25 year amort even when a 30 year option is on the table.

The RR tab tells me a story about type of tenancy- how granular they are and when the most roll would occur, who are the major tenants- for MF it does not really matter but for multi tenant office, industrial, retail, I would take note of the biggest tenants in the entire portfolio and will want to make sure they all dont roll in the same time. The CF tab adds color on historical variances in income and expenses for the different properties. This goes to your point on the properties operating differently. I fully expect them to- for certain properties, I expect to see a sudden increase in certain expenses like utilities or R&M. That will require further investigation. If you only take a high level view of the portfolio as a whole, you may not figure out that a certain property in the portfolio has consistently had a 5% increase in R&M year over year. You might be devoting your attention and resources to the properties that may not need your attention right now. Let me know if you have any other questions- happy to help. 

I have underwritten portfolio deals. You want to get an idea on how a single property in a portfolio is performing and so will the lender especially if its crossed. So, when I have underwritten a portfolio, I will have seperate tabs in excel for each individual properties CF and these would be pulling information from a rent roll tab and a CF tab which will have rent roll info and CF info for all the properties in the portfolio. Then, the first tab in my excel sheet will be a portfolio-rollup tab which basically shows you combined cash flows for the portfolio and is adding the cash flow from all the individual property tabs. Bottomline- I want to know how the combined portfolio looks and and also how individual properties look in the portfolio. Let me know if you have any questions. 

Even if nothing is for sale right now, I often find "dark trades" on RCA. My search parameters are often set to sales in the last 24 months or last 5 years if there are little comps. 

No stupid questions! This shows your are care and you want to learn and there is no better way to learn than ask questions. Conduit debt is CMBS debt. There are numerous ways to finance commercial real estate- banks, life cos, credit unions which are all balance sheet lenders-they hold the loans in their balance sheet till maturity. Another major source of financing is CMBS which a decade ago financed 50% of CRE and today finances 25% of CRE. CMBS loans are securitized post closing and sold in the secondary market. Because the loans are not held in the originators balance sheet post closing, risk for the lender is minimized and because of that you get attractive terms such as long loan term (10 years), leverage as high as 75%, fixed rate, non recourse financing and CMBS lenders are also open to cash out refinances and lending in secondary and tertiary market . The properties have to be stabilized though in order to be eligible for CMBS. Since the main topic here is hospitality, CMBS finances a lot of hotels and thats why hospitality is close to half of what I do. Let me know if you have any questions on CMBS, happy to help in any way I can.