By Justin Laub
On one side of the ring we have your Local Banker from Texas. He’s wearing a polo shirt from the country club to which you both belong and is sporting a freshly pressed pair of slacks. He’s waving to you from the ring and wants to know if you enjoyed the fishing trip with your son, Scooter. He’d love to refinance your shopping center down the street and also wants to take you out for a round of golf this weekend. On the other side of the ring we have your Wall Street CMBS Lender. He’s in a pinstripe suit, anxiously glancing at his watch every two seconds. You notice the bright gleam coming off the brass knuckles that are peeking out of his back pocket. He doesn’t notice you because he’s been on the phone for the past ten minutes on a heated closing call. He’ll give you a loan. You know the terms, so just let him know if you want the loan. Then suddenly the bell rings. The fight to do your loan is on!
As with other major markets in the US – NY, California, Chicagoland, etc. – the bank lending market in Texas is extremely competitive. Local banks in Texas are often able to offer terms (leverage, amortization, non-recourse, etc.) on middle-market real estate loans that are reserved for only the highest quality assets (and borrowers) in smaller, nearby markets such as Arkansas, New Mexico, Oklahoma, Louisiana, Kansas, etc. For that reason, local bank loans in Texas offer a compelling mix of aggressive terms and personal interaction that is hard to beat for certain types of commercial real estate loans. That makes the Local Banker in the ring not just a nice guy who knows your kids but someone who can get aggressive on his loan terms.
The Wall Street CMBS Lender is working with a different bag of tricks. The CMBS market is a high-octane lending machine. When it is running at full throttle, as it is now, it can offer up terms on certain deals that no local bank lender can touch. The trick is knowing what type of deal fits the CMBS box. Once you fit that box, you are going to get terms – such as non-recourse, high-leverage, 10-year fixed-rate debt, cash-outs, 30-year amortization, etc. – that aren’t available with local bank lenders on most deals. For these deals, you are going to want to put your money on the Wall Street CMBS Lender with the brass knuckles in his back pocket. You won’t even care about the fact that he won’t remember your name in a year and that the servicer on the loan isn’t interested in how Scooter is doing.
Choosing between local banks vs. CMBS and helping advise our clients on which deals fit which lenders is an everyday part of our business at Metropolitan Capital. Whether you are looking to refinance your property or to acquire a new one, we can advise you on the best type of lender to use and the optimal capital structure to do so. We have been actively helping clients get aggressive, fully non-recourse loans from local banks when our clients didn’t think it was possible and sourcing cash-out CMBS loans for clients who didn’t know it was available. Give any of our Senior Directors a call to discuss your lending goals. We’d be glad to help advise on the local bank vs. CMBS debate as it applies to your deal.