Key Issues For Sponsors in Capital Markets Financing of Commercial Real Estate
For sponsors looking to finance or re-finance commercial real estate assets in the COVID-19 world, financing term sheets are likely to come back from banks looking less friendly—both in terms of economics and the covenant package. Sponsors may therefore look to explore alternatives to bank finance, and one alternative is raising finance in the capital markets directly, so that your bond issuer is your day one lender. Whether you call it an agency CMBS (and as discussed below—this is somewhat of a misnomer) or a secured corporate bond really depends on your investor base and your leverage, but in each case it provides the opportunity of bypassing the lending desks and credit committees of banks. We have considered below the possible benefits and some of the issues—legal and logistical—that sponsors would likely need to consider if going down this route.