JANUARY 29, 2016 CMBS Issuance Could Be Choppy This Year With regulatory changes looming and spreads blowing out, conduit shops expect 17 SECURITIZATION PROGRAMS an uneven pace of commercial MBS issuance this year. The sharp spike in spreads this month has caused a pullback in originations. 38 SCORECARD FOR CMBS SPREADS Lenders say that will lead to a slowdown in issuance when loan warehouses become 2 Calpers Taps Deutsche for $1 Billion depleted, probably around late March. Another lull is likely later in the year — perhaps starting in October or Novem- 2 Debt Sought on SF Apartment Portfolio ber — as issuers grapple with the December implementation of risk-retention regula- tions. Those rules have injected so much uncertainty that market pros widely expect 2 Latitude Seeks $500 Million for Fund lenders to slow originations. The reason: to avoid being stuck with warehoused loans 4 CMBS Prices Rise, Reversing Course if issuance is disrupted as the implications of risk retention are sorted out. By the same token, that anticipated late-year lull could in turn prompt a bor- 6 Banks Await Winner of Vegas Rentals rower stampede over the summer, with property owners rushing to close mortgages before lenders become more cautious. “People will want to hurry up and get in Mesa West, Allianz Write DC Loans 8 See ISSUANCE on Page 16 10 Group Advocates for Women in CMBS 12 Witkoff Eyes Refi of NY Office Condo As Ban Ends, S&P Moving to Revive Business S&P 12 Goldman, UBS Share Retail Loan wants to jump back into the conduit market with both feet. As soon as its one-year ban from the sector ended last week, S&P executives 34 Floater Sought to Refi Pa. Office Parks began reaching out to commercial MBS dealers and investors in an effort to rebuild that part of its business. 36 Wells Reaches Servicing Milestone “We are having conversations with market participants to let them know that we 36 Square Mile Lends on Illinois Rentals are back in the market and confident that we have the resources needed to provide ratings and quality research” on conduit deals, executive managing director James 42 INITIAL PRICINGS Wiemken, global head of structured finance ratings, said in an interview Wednesday. S&P faces a big challenge. The agency’s conduit market share had plummeted even before the SEC enacted the ban last January, leading it to lay off 16 of the THE GRAPEVINE 48 members of its CMBS group in mid-2014. That followed a series of missteps that drew the ire of issuers and investors alike. So S&P will have to win back not Eli Hattem has joined CIBC in New York only dealers, which select the agencies that rate individual deals, but also bond as a managing director overseeing See BAN on Page 40 origination of commercial MBS loans. Hattem spent the past seven years at New Deutsche to Lead Loan for NY Condo Project York advisory shop Park Bridge Financial, where he was a founding partner. Before Extell Development is close to tying up an $888 million financing package for the that, he was chief operating officer of construction of a residential skyscraper in Lower Manhattan. Merrill Lynch’s conduit-lending program. Deutsche Bank has agreed to lead the floating-rate loan and is in the process He started last month at CIBC, reporting of rounding up other lenders to participate. The debt, with a four-year term and to Mike Higgins, head of U.S. real estate a one-year extension option, would back Extell’s planned 815-unit condominium finance. building, at 250 South Street, just north of the Manhattan Bridge. Several people with knowledge of the details said Deutsche is the sole lead at this Paul Jankovsky started at Quadrant Capital point, but one or more other lenders likely will step up to share that duty. A meeting this month as a managing director heading was held last week for banks interested in taking pieces of the debt. small-balance mezzanine lending. Dallas- The ballpark loan-to-cost ratio is 65%, pointing to a construction bill of around based Quadrant rolled out its mezzanine $1.4 billion. Pricing would be 300 bp over one-month Libor on the initial proceeds, program in October with a $20 million stepping up to 375 bp when significant drawdowns begin. origination target. President Michael Young The 80-story tower, dubbed One Manhattan Square, would be one of the largest See GRAPEVINE on Page 51 See DEUTSCHE on Page 14 January 29, 2016 Commercial Mortgage 2 ALERT Calpers Taps Deutsche for $1 Billion selling an equity interest of up to 49% or a preferred equity stake. The Mosser venture bought most of the 12 buildings from Deutsche Bank has agreed to write a $1 billion fixed-rate local owners. It plans to spend some $10 million on upgrades. loan to finance Calpers’ pending acquisition of the office build- The largest of the properties has 58 units. Some 90% of the ing at 787 Seventh Avenue in Midtown Manhattan. apartments are rent-regulated. Calpers has agreed to buy the 1.8 million-square-foot prop- A substantial amount of San Francisco’s multi-family stock erty, formerly called the Equitable Tower, from AXA Equitable is old and subject to rent regulation, yet investors and lenders Financial for $1.9 billion. have been bullish on the city as values continue to rise. Portfo- Deutsche will securitize the 10-year loan via a stand-alone lio offerings have seen heavy bidding in recent months, as they offering, likely next month. The loan-to-value ratio is a skimpy give institutional investors a chance to achieve scale quickly in 53%, which will likely make the deal appealing to bond buyers. the hot market. Calpers is being advised by CommonWealth Partners of Los Angeles. Eastdil Secured is brokering the property sale for AXA Latitude Seeks $500 Million for Fund and the loan for Calpers. AXA put the building and the adjacent 1285 Avenue of the Latitude Management Real Estate is soliciting $500 million Americas on the block last fall. The two buildings are back-to- of equity for its fourth high-yield debt fund, which would be back, stretching from West 51st to West 52nd Streets, between its largest to date. Sixth and Seventh Avenues, in the Midtown West submarket. Like its predecessor, LM Real Estate Capital Fund 4 would AXA and a partner, J.P. Morgan Asset Management, have sepa- shoot for a 10-11% return by originating bridge loans on com- rately struck a deal to sell 1285 Avenue of the Americas, which mercial properties in primary and secondary markets. The typ- also encompasses 1.8 million sf, to RXR Realty of Uniondale, ical borrower will be a buyer planning to upgrade a property or N.Y., for about $1.7 billion. That property was formerly known improve its management. as the Equitable Building. Marketing is to begin next month, with an initial close The 50-story tower at 787 Seventh Avenue is 98.3% leased, expected at the end of the second quarter. If it reaches its goal, with a weighted average remaining lease term of 8.5 years. The the fund could have some $1.25 billion of lending capacity with tenants include BNP Paribas (463,000 sf until 2022), Willkie leverage. Farr (355,000 sf until 2027), Sidley Austin (352,000 sf until Beverly Hills-based Latitude lends against all property 2022), Stifel Nicolaus (215,000 sf until 2026) and UBS (152,000 types, but doesn’t write land or construction loans. The geo- sf until 2025). UBS, whose headquarters is in 1285 Avenue of graphic focus encompasses the southern half of the country the Americas, has evidently expressed an interest in expanding and the Pacific and Mountain states. The fund would mainly its space. target floating-rate loans of $5 million to $35 million, with Sources familiar with the property said the tenants are con- three-year terms and extension options going out to five years. tractually obliged to pay $1.1 billion of rent through their lease The loan-to-cost ratio would generally be 75-80%. expirations. Latitude’s pitch will target U.S. and European pension funds The property was built in 1985 as the headquarters of Equi- and life insurance companies. Wren Capital of San Francisco is table Life, which was acquired in 1991 by French financial-ser- its placement agent. vices giant AXA. Two high-end restaurants, Le Bernardin and The largest investors in its $405 million Fund 3 are Texas Bar Americain, lease space on the ground floor. The building Employees ($100 million), Pennsylvania School Employees ($75 also includes a swim club, an 80-car garage, a 487-seat audito- million) and Ohio Bureau of Workers Compensation ($50 mil- rium and a television production studio. lion). That vehicle held its final close in 2013 and is now 95% invested. Debt Sought on SF Apartment Portfolio Rather than the typical three-year investment window, Fund 4 will have a five-year period to give it more flexibility to A partnership is shopping for up to $120 million of floating- recycle capital into fresh investments. rate debt to refinance a dozen San Francisco apartment proper- Latitude is led by president Glenn Sonnenberg and executive ties. vice president Chip Sellers. It was formed in 2009 via a manage- Local developer Mosser Cos. and New York hedge fund shop ment buyout of a Legg Mason fund operation, Legg Mason Real BlueMountain Capital are talking to lenders about a five-year Estate Investors.