How KeyBank Is Reaching Smaller CMBS Investors

We’re retaining risk collectively, but we are the one servicer throughout the servicing stack, which is unique versus traditional pools of CMBS, says KeyBank’s Matt Ruark.

While they may not be working to develop products for the person who wants to put $50 or $100 into a real estate transaction, large capital providers are innovating with the smaller borrowers in mind.

In the CMBS sphere, KeyBank has combined risk retention with the servicing, allowing it to reach smaller investors.

KeyBank has taken pools out of $125 to $150 million, while maintaining a relationship with a B buyer. “We’re retaining risk collectively, but we are the one servicer throughout the servicing stack, which is unique versus traditional pools of CMBS,” says Matt Ruark, head of commercial and healthcare mortgage production for KeyBank Real Estate Capital.

Ruark says the program, called Streamline, came out of KeyBank’s desire to deliver “liquidity to smaller loans and service our clients.” The firm’s ability to risk-retain in combination with its servicing platform made this possible.

“This streamlined CMBS product was designed to deliver liquidity to that $2-to-$15-million borrower,” Ruark says.

Ruark says the traditional conduit execution can be expensive to close and it does not always compete well with the bank market for smaller loans. “The capped cost and one servicer allows us to provide capital that competes with the  bank market more favorably than the traditional conduit,” he says.

Innovation is also occurring with the new bridge products hitting the market from many sources. In a low interest-rate environment, sponsors and capital providers are getting creative to boost returns. Borrowers have moved up from 60% or 65% LTVs to 70% or 75% as they take on mezzanine debt.

“There are many different bridge programs out there,” Ruark says. “These programs are providing capital across asset classes.”