11/19/2010

Berkadia to Originate Loans for Securitization

Berkadia Commercial Mortgage plans to originate fixed-rate commercial mortgages and sell them to securitization shops.

The Horsham, Pa., firm has set aside some $200 million to start the program. It will focus on loans of $5 million to $25 million on stabilized retail, office, warehouse and multi-family properties. A typical mortgage will have a term of 5-10 years, a loan-to-value ratio of 60-75%, and a coupon of 5-6%.

Since being formed a year ago, Berkadia's lending operation has focused mostly on agency mortgages. The fixed-rate program, headed by commercial MBS veteran Joseph Franzetti, is the company's first attempt to build a private lending arm.

Berkadia also is launching a floating-rate program that will provide bridge loans to apartment-property owners awaiting approval for permanent financing from Fannie Mae or Freddie Mac.

Under the fixed-rate effort, Berkadia plans to fund the loans and then sell them to issuers amassing mortgages for securitization. It expects to form relationships with a handful of securitization shops. Berkadia would prefer to retain the primary-servicing rights to loans it sells in order to maintain relationships with borrowers and generate fee income.

Berkadia will start accepting loan applications early next year. It would consider loans of more than $25 million, but would likely need a partner to take those down.

Franzetti, a senior vice president, joined Berkadia's New York office in mid-April to build the firm's relationships with lenders. He previously worked at Cohen Financial of Chicago and Citigroup. He became well known in the CMBS industry in the 1990s when he served as head of the CMBS ratings groups of S&P and Duff.

Berkadia is a joint venture between Warren Buffett's Berkshire Hathaway of Omaha, Neb., and Leucadia National of New York. The duo set up the firm to buy the servicing and origination operations of the bankrupt Capmark.

The floating-rate program, overseen by executive vice president John Cannon, will also start early next year. Berkadia hasn't set an origination goal.

Loans will range up to $25 million, with terms of up to 12 months. The floating-rate coupons will be pegged to one-month Libor, with a floor rate. Initial coupons will likely be about 6-7%. Leverage on individual properties could go as high as 80%, but will usually be several percentage points lower than the leverage on the proposed Fannie or Freddie loan for which the borrower is awaiting approval.

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