Prime Finance CMBS Strategy – Growing CMBS B-Piece portfolio:
Prime Finance’s CMBS strategy invests in investment grade and below-investment grade Commercial Mortgage Backed Securities (CMBS) both at original issuance and on the secondary market. As B-Piece buyer, Prime has the power to influence the credit and inclusion of loans in the trusts. The loans underlying the CMBS securities are typically fixed-rate, long-term loans on stabilized properties diversified by geography and product type.
Prime has invested in over 30 CMBS new issue and secondary market investments. Prime has purchased B-Pieces from Wells Fargo, Morgan Stanley, Bank of America, Goldman Sachs, UBS, Citigroup, JP Morgan, Barclays and Credit Suisse. Prime has invested $600 Million in over 30 CMBS portfolios consisting of over 1,600 loans with a total face amount in excess of $26 Billion.
As an established, credible and respected CMBS B-Piece buyer Prime has deep relationships across the major CMBS issuers which allows Prime access to a steady flow of new issuance and secondary market investment opportunities. Prime’s process is distinguished by pool selectivity and a thorough and fair due diligence process.
Prime’s typical due diligence process for new issuance CMBS securities:
|Sourcing:||– Extensive contacts across issuers
-Majority of transactions are directly negotiated
-Bids utilizing various structures
|Pool Selection:||– Prime avoids pools with large exposure to outsize risks
-Credit quality is paramount
|Diligence:||– Loan by loan underwriting review
-Extensive and deep due diligence including visits to every property
-Prime’s direct lending business provides deeper knowledge of local markets and competitive properties
|Underwriting:||– Asset level cash flow analysis
– Downside testing for durability of cash flow under various scenarios
– Testing at portfolio level to assess credit quality and downside protection
|Downside Protection:||– Recommend removal of loans that may have downside exposure and modifications of loans to reduce risk – size, terms and other provisions
– Credit first approach
|Strategic Partnerships:||– Prime will often partner with another B-Piece buyer
-Provides further due diligence, promotes diversification and increases deal flow
-Prime does not own a special servicer, choosing the best group for each pool and negotiating fee shares
Prime’s investment process begins with differentiated sourcing, careful selection of which credits to buy, followed by intensive and deep due diligence. Issuers know that Prime delivers speed, certainty and transparency to CMBS issuers and sellers.