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CMA
March 06, 2020  

CIBC Cuts 12 CMBS Executives, Shutters Unit

CIBC has shut down its U.S. commercial MBS group.

The Toronto bank abruptly laid off eight professionals from the roughly 20-member conduit team on Monday and informed four others they will be let go within six months.

Another six were re-assigned to work on commercial mortgages that CIBC originates or invests in for its own balance sheet. Insiders said that business, which the bank will continue to operate, accounts for at least $3 billion of CIBC’s annual commercial-mortgage origination volume in the U.S. By comparison, the bank has originated less than $350 million of conduit loans annually for the past four years.

CIBC transferred two other CMBS pros this week to a separate balance-sheet lending operation the bank absorbed via its $5 billion takeover of Chicago-based PrivateBank in mid-2017.

CIBC announced internally that it was exiting the CMBS market due to a lack of demand for conduit loans among its customers in the U.S. The bank still offers “a range of products and solutions to our U.S. commercial real estate clients,” a spokesperson said. “As we continue to build our U.S. business, we remain focused on meeting [their] needs.”

Former employees said the pullback from conduit lending stems in part from the acquisition of PrivateBank, whose executives immediately took control of CIBC’s commercial-mortgage platform and began reorganizing it. A number of senior executives in the group were pushed out early on — starting with managing director Michael Higgins, CIBC’s longtime head of U.S. real estate finance.

“The PrivateBank people didn’t really understand CMBS. They’re more comfortable with balance-sheet lending because they were already doing that in Chicago,” said a former CIBC staffer.

The timing of CIBC’s move surprised some industry pros because the bank is expected to contribute $179 million of loans to a $788.3 million conduit offering, led by UBS and Deutsche Bank, that’s slated to hit the market in the next week or two (UBSCM 2020-C19).

The CIBC staffers who left on Monday included six in New York: Michael Cozza, Andrew Leonard, Jonathan Luwisch, Gregory Newman, Michael Ottomanelli and Michelle Waterman. The other two were Owen Bouton in Atlanta and Charles Wilde in Newport Beach, Calif.

All but two of them were loan originators. The exceptions were Waterman, who handled underwriting and origination duties, and Luwisch, who worked on the CMBS structuring and distribution team led by Michael Zampetti in New York.

Zampetti and Mimi Cheng, head of CMBS pricing and distribution, will stay on board for a while to unwind the operation. Word has it that Zampetti could remain until September and Cheng could stay until May. Kevin Cull and Jonathan Man, who work on Cheng’s team in New York, will leave at the end of the month.

Zampetti and Cheng are managing directors. Cull and Man are executive directors, as were Luwisch and the six originators who left this week. Waterman was a director.

While CIBC was never a leading lender in the CMBS market, it has long been a regular contributor of collateral to conduit offerings. The bank’s annual share of overall issuance in the U.S. hovered in the 2-3% range in the years leading up to the market crash — peaking at 3.5% in 2001, when it originated $1.2 billion of CMBS loans. On a total dollar basis, its annual origination volume was highest in the years immediately before the credit crisis: $3.92 billion in 2006, for a 2% market share, and $3.93 billion in 2007 (2.2%), according to Commercial Mortgage Alert’s CMBS Database.

Since the crash, CIBC has focused more on balance-sheet lending, amassing a portfolio that currently amounts to $13 billion. The bank’s post-crash originations of conduit loans in the U.S. reached a high of $1.242 billion (2.2%) in 2014, but its CMBS market share has been below 1% since then.

U.S. real estate finance chief John Heiberger remains in charge of balance-sheet lending, a position he assumed from Higgins following CIBC’s acquisition of PrivateBank. Managing director Bill Deftos, another PrivateBank alumnus, oversees loan production, reporting to Heiberger.

Before his 2017 departure, Higgins had led the commercial-mortgage operation since CIBC hired him to set it up in 1996.