The CMBS market is getting a boost with the return of mezzanine investors that will purchase some of the riskiest pieces of securitizations or commercial real estate loans.
These investors have largely been on the sidelines since CMBS issuance dried up in 2007.
“The mezzanine market is back in full force,” said Gretta Guggenheim, co-founder and president of Ladder Capital.
The New York-based conduit originates and securitizes CRE loans. Ladder Capital ranked third in CMBS issuance in 2010.
“There is a tremendous amount of capital” to take a mezzanine position in loans, she told the Urban Land Institute (ULI) forum on capital markets Monday morning.
In originating high loan-to-value ratio loans, Ladder will go up to 80% LTV.
“We will securitize the first mortgage,” Guggenheim said, and sell the remaining 15% to 20% LTV piece to mezzanine investors.
Meanwhile, market watchers are estimating that CMBS issuance could range from $35 billion to $50 billion this year, compared to $11 billion in 2010.
ULI senior fellow Stephen Blank pointed out that $13 billion in CBMS is slated to be issued in the first quarter.
It shows “how quickly CMBS is coming back,” he said.