Not so long ago, the market for commercial mortgage–backed securities, or CMBS, faced possible extinction.
The notion of banks making loans that they would not hold on balance sheet but instead sell off as bonds to investors transformed overnight from an efficient funding tool to a model for excessive risk-taking in the eyes of politicians and investors, following the global financial crisis.
“Securitisation became a bad word,” recalls Bhavesh Patel, head of commercial real estate distribution and underwriting at Deutsche Bank. “It was one of the first dominoes to fall during the crisis, and asset-backed securities (ABS) in general got tarnished with the same brush as subprime residential mortgages.”
Yet with the dramatic improvement of commercial property values over the past couple of years and the outsized returns