To take advantage of the growing number of single-asset commercial real-estate transactions, Banc of America Securities has formed a commercial mortgage-backed securities capital markets group.
The group, headed by managing director Ken Rivkin, will focus on securitizing large single-asset and single borrower real-estate debt transactions. The group will also originate, structure and provide bridge financing for large single-borrower CMBS transactions. B of A began its CMBS business when Rivkin joined the company in 1994.
"This was done previously by other people who are part of the team, but now what we're doing is we have dedicated focus to provide superior customer service for a growing piece of the business," said a B of A spokeswoman. "From '98 to 99, it was a declining business, with shrinking volumes, and this is one segment that actually is increasing. And many people project it will continue to be very active."
"Externally, this is a much larger business than it was before," said the spokeswoman, noting that the single-asset securitization market was less than $3 billion in 1998 or 4% of the CMBS market, and by 1999 it had jumped to about $16 billion, or 23%.
"We created this unit to capitalize on a growing market," said Bill Hodges, managing director of B of A's real estate group in a press release. "The pieces for a successful business platform are in place: strong client relationships ... balance sheet availability, effective distribution and a focused team to manage the flow." B of A has 2300 associates in its real estate group.
The spokeswoman said that the merger of Bank of America and NationsBank has given the combined company a large balance sheet to commit the capital for these types of transactions. "Either you have to have to be a big organization and use a little piece of your balance sheet, or be a smaller organization and use a major part of it," the spokeswoman said.
"At a certain point, if you're too small, just for risk diversification issues, it's probably difficult to be competitive in this business," she added. "And in most cases, this is a principle business, and it's important to have a large balance sheet to commit the capital for these type of transactions."
A single-asset securitization is usually a regional mall, Class A office building or a large upscale hotel. A single-borrower securitization has multiple assets affiliated with one borrower or sponsor. Both types of securitizations are usually worth over $125 million and average $400 million.
B of A conducted five large-loan deals last year worth approximately $2.5 billion, giving the deals an average size of $500 million. So far this year, B of A is working as a comanager on two deals, a $500 million Vornado Finance LLC transaction, and the other a $400 million Goldman Sachs large-loan deal, with 277 Park Avenue in New York City as a majority of the collateral.