Goldman Launches Fixed-Rate Loan Program
Seeing cracks in the frozen loan market, Goldman Sachs has launched a program aimed at originating fixed-rate commercial mortgages of $25 million or more.
Goldman initially plans to retain, syndicate or sell the five-year mortgages in the whole-loan market. But it could start securitizing mortgages down the road if the commercial MBS market revives.
The program supplements one for floating-rate loans that Goldman started early this year. The buzz is that Goldman thinks it's time to pursue high-end, fixed-rate loans because borrowers and lenders have moved closer to agreement on rates and terms than they were several months ago.
It's unclear how much capital Goldman is allocating for the two loan programs. To be sure, no one expects the bank to open up the lending spigot. Still, the fact that a major lender is out in the market touting the availability of fixed-rate loans could be a sign that the credit crunch is easing.
Goldman's origination specialists in Dallas started spreading the word about the fixed-rate program last week. The bank is offering to write five-year loans with 30-year amortization schedules and no extension options. Coupons will be in the vicinity of 8.5%. Loan-to-value ratios can't exceed 65%. There is a 1% origination fee and no exit fee at maturity. Loans cannot be prepaid for two years, after which defeasance is an option. Goldman will finance a mix of property types in metropolitan areas with at least 100,000 residents.
The floating-rate program, which also has a $25 million minimum, offers interest-only loans with two-year terms and two one-year extension options. There is a 1.5% origination fee and a 50-bp exit fee.
The floating-rate program has been aimed at borrowers seeking a bridge to the re-emergence of long-term loans at reasonable rates. While the effort has attracted interest, only one mortgage has closed so far: a $40 million loan in May on a New Jersey retail center owned by Developers Diversified Realty of Beachwood, Ohio.
Goldman evidently thinks that some property owners - including ones that had considered floating-rate loans - are now willing to look at fixed-rate loans because of improved market conditions. The bank is said to be considering some loans on retail properties and a smaller number of applications for office or industrial mortgages. The bank has also received a number of requests for hotel loans, but it's taking a highly selective approach to the sector. Multi-family borrowers are also eligible, but most of them are likely to stick with the more-favorable terms offered by the mortgage agencies.
Goldman's loan-origination effort is spearheaded by Dan Bennett, Tim Gallagher and Mitch Resnick, who took over the U.S. commercial mortgage group from managing director Mark Buono in June. Their team consists of about 30 originators, underwriters and traders in New York and Dallas.
Bennett and Resnick are vice presidents who oversee commercial real estate loan origination, trading and distribution. Gallagher is a managing director who concentrates on the investment-banking side of the business. All three are based in New York and work under partner David Lehman, who co-heads structured-product trading with Michael Swensen.
Buono, meanwhile, left his longtime post as head of Goldman's commercial-mortgage business to join a new special-assets group. In that role, he supervises the evaluation, monitoring and disposal of troubled commercial real estate assets in the bank's portfolio.