"This is a good sign that commercial real estate lending is recovering from the financial crisis. Commercial real estate defaults had a big impact on many community and regional banks that had invested in shopping centers, apartments and hotels. The opportunity for nonbank lenders is vast with Commercial Mortgage-Backed Securities, Conduit Loans and other financing companies jumping into the game. Knowing where to go and who to get financing from is the key." - Douglas Pratt
Cantor Fitzgerald LP's growing commercial-property lending business is planning an initial public offering and has tapped Deutsche Bank AG DBK.XE -1.01% to lead the effort, according to people familiar with the company's plans.
The deal, expected to take place later this year, would follow the initial public offering of another commercial-property lender, Ladder Capital Corp. That company is hoping to raise $212 million to $238.5 million in the deal, which was slated to price Wednesday evening.
The offerings are the latest sign that nonbank lenders are playing an increasing role in markets that aren't being served as much as they used to be by traditional banks.
Some banks have increased the pace of their commercial-real-estate lending in recent years, but demand has accelerated faster.
Formed in 2009, Cantor Commercial Real Estate Co. was the sixth-largest originator of commercial mortgage-backed securities in 2013 with $5.3 billion in new issues. In that business, Cantor makes loans on malls, office buildings and hotels around the country, bundles those loans together and sells them off as bonds.
It is unclear how much the Cantor real-estate affiliate wants to raise in an IPO, and a Cantor spokeswoman declined to comment.
A spokeswoman for Deutsche Bank also declined to comment.
The move to go public is partly based on the fact that early investors in the affiliate want the ability to sell their interests, according to people who have discussed the issue with the company. Cantor Commercial Real Estate's largest investor is California-based private equity firm CIM Group, which invested $350 million in 2010 and owns 55% of the company, according to a report last year from Standard & Poor's Ratings Services. Cantor Fitzgerald owns 11% of the affiliate, the report said.
The commercial mortgage-backed securities business, which saw $228 billion of new issues in 2007, almost evaporated during the early years of the financial downturn but it is coming back. More than $86 billion in commercial mortgage-backed securities were sold in 2013, up from $11.6 billion in 2010.
Ladder, led by Brian Harris, a one-time lending executive at UBS AG, holds some of the real estate loans it makes on its own balance sheet and sells others as commercial mortgage securities.
Ladder Capital sold 13.25 million shares in the offering on Wednesday night, at $17 apiece, according to people familiar with the matter. The stock is set to begin trading Thursday.
At that price, the company will have a stock-market value of $1.7 billion, including both classes of shares created by the IPO. It plans to use the money raised to invest in additional mortgage loans, the company said in its prospectus.
Outside of the commercial mortgage-backed securities sector, nonbank lenders to individuals already have seen a spurt of public offerings, including Springleaf Holdings Inc., the former personal-loan arm of American International Group Inc., and Santander Consumer USA Holdings Inc. General Electric has said it plans to split off its retail lending business via an IPO this year. Other startup lenders also are waiting in the pipeline with potential IPOs. Lending Club Corp., which started in 2006 and makes loans to individuals using money from both small investors and big institutions is preparing for an IPO that could come as soon as this year, says founder and CEO Renaud Laplanche.
"We're in this favorable environment in terms of the economic trend and the credit quality of consumers, yet the cost of credit for many consumers has gone up," he says. "The personal loan product is one that the banks have moved away from. There's a very big dislocation in the market."
For more Front Street News, click here...