On the heels of a very successful $160 million securitization of seasoned commercial mortgage loans for Sun Life of Canada, Northfield-Ill.-based Newman & Associates - a wholly owned subsidiary of GMAC Commercial Mortgage that represents life insurance companies in private CMBS transactions - is poised to make even more strides this year in the private arena.

In addition to constantly working with its parent company, Newman is planning to team up with another mortgage real estate investment trust later this year in a securitization effort that involves developing an exit strategy for the REIT as it originates higher risk and higher yield loans. It is also constantly working with an array of insurance companies. Moreover, the company will most likely team up with Portland, Ore.-based Standard Mortgage Investors LLC in the near future for a private CMBS transaction.

"We've developed a niche where not too many others have played in our arena," said Stuart Salins, senior vice president of Newman & Associates. "We represent groups that have determined, for whatever reason, that they don't want to go the large Wall Street CMBS route."

In the latest offering, which just recently priced, the company represented Sun Life of Canada for the second time. Sun Life has done three major capital market transactions. In the current one - which sold to one investor in less than 30 days - Newman & Associates structured it on a 90/10 parri passu basis, selling a 90% interest in each individual loan on a non-pooled basis. Sun Life retained a 10% interest in each loan and servicing of the loans.

"What makes this deal stand out is the fact that it was done in under 30 days, and also that it was cost effective and we achieved a pricing execution and spread comparable to CMBS between single-A and double-A CMBS," Salins said.

Salins has worked with Sun Life of Canada for many years, having represented them in a participation sale several years ago. "Lehman did a CMBS transaction for them, but they determined, after working with us, that our way was the route that they wanted to go," he noted.

Similarly, Newman & Associates has worked for many years with Lutheran Brotherhood (MBSL 10/18/99), completing three out of four of the latter company's transactions: a whole loan portfolio sale, a private securitization, and a senior/subordinated large participation sale.

Newman & Associates has done approximately $800 million of private securitizations for its parent, GMAC Commercial Mortgage, last year alone.

One of the primary reasons that sellers often seek out the private placement market for their CMBS transactions is that the size of their offering might not be big enough on a stand-alone basis, and they might not want to combine their loans with someone else's loans.

"They may not want the perception of their loans combined, for instance, with some conduit loans," Salins said. "So what are their alternatives? They can do something by themselves directly. But when you start to get to larger portfolio transactions, it becomes difficult for a lender to do it themselves."

Companies such as Standard Mortgage Investors often do transactions directly, but these one-off deals can work this way only because they are small. "We'll probably do something with [Standard Mortgage] down the road," Salins added.

As to whether the current environment for CMBS presents a good opportunity for originators to enter the private securitization market, Salins said that depends on whether institutions mark-to-market their loans: "There is a lot of interest with institutions to generate capital to redeploy into mortgages, but for those institutions that don't mark their loans, it's a tough time to do something; interest rates are higher...and to take some loans that are only a year or two old, the economics would preclude something right now."

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