CMBS debt is still playingsecond fiddle to life companies on retail deals, but in specificdeals CMBS just works better. The unnamed owner of two neighborhoodretail centers has secured two loans totaling $31 million torefinance the properties, which are located in Aliso Viejo andWestlake Village. The borrower secured the funds through a CMBScompany because they had specific issues that made themincompatible with life insurance companies.

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"We originally sought to do these deals with a life companybecause they were low leverage, but there were two issues for thelife companies," Sharon Kline, EVP atCBRE, tells GlobeSt.com. "First, the propertieswere shadow-anchored centers, so there was no security. The otherissue was that the borrower wanted 10 years interest only, becauseit was low leverage. I talked to several life companies, and thatwasn't going to work for them." Kline secured the finds on behalfof the borrower along with her colleague, MarinaMassari of CBRE.

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When Kline did take the assets to the CMBS market, there was alot of interest. "When we went to the CMBS market, I only went to ahandful of companies, and those were not issues for CMBS," shesays. "CCRE flew out to meet with me and the borrowers, and thatsealed the deal. They also had the best spreads and low interestrates."

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While CMBS was the right fit for the deal, the borrower had aprevious bad experience with a CMBS lender and was hesitant tosecure funding through another CMBS platform. "They weren'tuncomfortable, but they had a bad experience with a CMBS lender,"says Kline. "But, the rent was so good, and they just bit thebullet. We felt that rates are as good as they are going to get,and that put this to bed for the next 10 years."

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However, if possible, retail owners are going the life companyroute whenever possible. "If these deals were grocery or druganchored, it definitely would have been a life company deal—but itcould have been a CMBS deal either way. There are benefits to CMBS,particularly the higher leverage," Kline says. "If you need highleverage, you have to go CMBS. It really depends on what you needin your financing."

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Of course, because retail has become a higher risk, CMBS hasdone a lot of retail deals. "CMBS does a lot of retail," saysKline. "They are definitely willing to do that type of property,but I don't do a lot of CMBS loans. The preference is still to gothe life company route."

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.