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July 17, 2020  

Santander Sees Opening for 'Repo' Business

Santander has joined the diminished field of banks providing credit lines to U.S. commercial real estate lenders and debt investors so they can leverage their positions or warehouse loans prior to securitization.

The Madrid bank’s investment-banking unit also intends to participate in syndicates that originate debt to be securitized via commercial MBS offerings, said Rob Cestari, Santander’s head of real estate structured finance in New York.

The former Bancorp Bank executive was hired nine months ago to spearhead the effort. The two-pronged lending platform launched this month as a number of other warehouse lenders remain on the sidelines amid the market turmoil caused by the pandemic.

“This turned out to be a good time to enter the market,” Cestari said. “Our clients will need liquidity to support their loan portfolios or assets they’re going to be acquiring over the next six months,” he added, noting that many will be pursuing opportunistic investments in new and outstanding mortgages.

The bank intends to fund the initiative with about $1 billion of capital over the next 6-12 months, focusing heavily on floating-rate debt tied to industrial properties, data centers and offices.

Most of its initial commitments will be through repurchase facilities that securitization shops, bridge lenders, debt-fund operators and other institutional clients could use to fund their originations or purchases of seasoned loans. Plans call for the bank to provide two or three “repo lines” by yearend, each with a funding limit of roughly $250 million to $500 million.

The bulk of that capital, as well as funds used for loan syndications, will be continuously recycled as the collateral debt is securitized. That, in turn, will allow lenders to draw again on their replenished credit lines and make room for others to come on board, Cestari said.

His team won’t fund mezzanine debt. And it also will avoid competing with a separate, established unit of Santander’s commercial-banking division that focuses on originating multi-family mortgages and construction loans in various property sectors. That means construction financing and direct loans on apartment properties are off the table. But its repo lines might still be collateralized by small amounts of multi-family debt.

Cestari reports to managing director Nuno Dias Andrade, the head of structured finance for Santander’s corporate and investment-banking division in North America. Before joining the bank last October, Cestari spent just over a year working on business development at Lexington National Land Services, a Blackstone subsidiary in New York. Before that, he ran the floating-rate lending program at Bancorp from 2014 to 2017. Cestari previously was a CMBS trader at several broker-dealers, including Stifel Nicolaus, PrinceRidge and Cohen & Co.