2. R E A L E S TAT E F I N A N C E V I A T H E The resulting CMBS are capital markets
C A P I TA L M A R K E T S instruments that can be sold to international
investors.
Firmly established on the international scene
It should be noted that standardised processes
for many years, mortgage-backed securities
and defined valuation criteria make CMBS
(MBS) have also recently become a recognized
Warehousing very attractive for investors.
alternative to traditional real estate finance in
Property profitability is based on a stable cash
Germany. The key difference is refinancing via
flow from existing rental income accompanied
the capital markets instead of conventional
by an appraised default risk.
Pfandbrief funding. This process creates
capital markets eligible securities whose C O N V E N I E N T I M P L E M E N TAT I O N
default risk is collateralised by the real estate
For you as a borrower, CBMS Warehousing
financing instruments and their underlying
offers a number of benefits:
mortgages.
– Loans are extended to a special purpose
A particularly attractive option is the securi-
vehicle (borrower SPV) on a non-recourse
tization of commercial mortgage receivables,
basis, i. e. with-out personal liability for
called “commercial mortgage-backed securi-
you in your capacity of shareholder.
ties” (CBMS). Catering to our customers’ high
– Unlike traditional bank loans, you will not
requirements, we have packaged our services
be affected by future credit ceilings set by our
in this area in a product hitherto unparalleled
bank if you opt in favor of CBMS Warehousing.
in the German market: CMBS Warehousing.
– The reference yardsticks for defining loan
Generally speaking, access to the capital
size are not just market value, but also, and
markets presupposes very high transaction
in particular, rental income generated. Loan
volumes ranging between EUR 300-500 million.
extension takes its bearings from the situation
CBMS Warehousing now enables us to pool
prevailing in the real estate market, which
several smaller loans together to achieve a
could create fresh leeway for the release of
portfolio of sufficient total size. The resultant
equity capital.
commercial real estate loan portfolio allows
– Market value is calculated by independent
our customers to gain access to the capital
appraisers not affiliated with the bank, and
markets.
percentage loan-to-value (LTV) limits and loan
BENEFITING FROM SHARED INTERESTS terms are transparent for you at all times.
– The cost structure is usually more favorable,
In simple terms, CBMS Warehousing is the
although the typical loan processes remain
programme we use to assemble individual
exactly the same as those you are already
smaller mortgage loans with individual
familiar with from other credit products.
volumes of about EUR 10-50 million into a
– This also applies to the loan agreement; here
larger pool suitable for a public CMBS trans-
we are Germany’s first bank to have designed
action. The smaller loans are assigned to a
such an agreement in the familiar form in
portfolio for a certain period (six to twelve
accordance with German law (German
months), and once the portfolio volume
Commercial Code, or BGB).
required for a capital market transaction is
reached, the entire pool is sold to a newly
established, bankruptcy remote special
purpose company. The special purpose
company funds this purchase by issuing
and selling CMBS, where the credit risk of
the whole pool is carved up into individual
tranches each individually rated by rating
agencies. This process is known as securi-
tization.
3. R E TA I N I N G T R I E D - A N D - P R O V E N Y O U R A D VA N TA G E S AT A G L A N C E
F E AT U R E S Capital markets orientation permits attractive
pricing, as a larger number of potential
In principle, CMBS Warehousing is suitable investors can be reached via the capital
for all commercial real estate properties with markets
stable, predictable cash flows and long-term Limitation of personal liability
tenancy agreements with the longest possible (“non-recourse”)
duration. Depending on the current capital Credit volume based exclusively on
markets environment, terms are frequently current market value
much more favorable than those offered by Transparent, concise contractual
traditional bank loans. And because securi- documentation in German
tized receivables do not appear in the bank’s Extended scope for action releases
balance sheet, they do not place a burden on equity capital
your customer limit, but instead even expand Familiar and tried and tested credit
your financial leeway. If you agree to transfer product offering new opportunities
your loan, nothing much will change for you,
except for the opportunity to obtain more
attractive terms. As usual, your financing is
based on a loan agreement concluded with
HypoVereinsbank, which will remain your
knowledgeable contact and service partner
after transfer of your loan to the special
purpose vehicle.
4. OUR ANSWERS TO
YOUR QUESTIONS
What benefits does CMBS Warehousing offer?
The most important benefits are access to more favorably
priced funding options offered by the capital markets and
borrowing without company owners’ personal liability
(“non recourse”).
Why is CMBS more favorably priced than other
types of loans?
Because the loans are refinanced via the international
capital markets, which permits more efficient risk
distribution through tranching of the loan pool as
well as access to a considerably larger number of
investors.
What is the maturity period of the loan?
Depending on the tenancy agreements concluded and
the capital markets setting, the maximum maturity period
of a loan is ten years. This corresponds to the normal
standard in Germany.
When and how will distributions be paid out?
Payouts will be made one month after each quarterly
review of the financial ratios, provided that the latter
are in compliance and no arrears have been accrued
on the loan.
What are the borrower’s obligations?
Regular presentation of quarterly reports. Content:
tenancy rates, including rental income received,
vacancy rates, investments made and maintenance
expenses incurred as well as general reporting on
tenancy relationships.
Who is the creditor?
Loans are extended by HypoVereinsbank. Our intention
is to sell the loan to a securitization company established
specifically for this purpose – a special purpose vehicle –
within six to twelve months after pay-out of the loan. The
SPV refinances itself via the international capital market.
How do I establish a special purpose vehicle?
The establishment of a borrower SPV can be handled by
your auditor or tax consultant. Alternatively, we will be
pleased to refer you to a law firm or auditing company
that can help you establish an SPV on its behalf and will
assume responsibility for the ongoing management of
the SPV.
What consequences does the sale of the loan
have for me?
In practice, the sale does not have any implications,
because loan processes will be continued in the
customary manner.
Who will be my contact after the sale of the loan?
A HypoVereinsbank relationship manager who handles
the loan as a specialist and is also available for any
questions will initially remain the borrower’s service
partner.
5. “Our overriding maxim is: act in such a
manner that the effect of your decisions
always satisfies your customers’ highest
requirements. CMBS Warehousing is a
successful example of this approach. With
this product, we have responded to our
customers’ increased requirements with
respect to professional real estate finance
and set high standards in the fledgling
European market for real estate loan
securitization. We thus offer our customers
not only access to the capital market, but
also hitherto unparalleled convenience in
contractual implementation. With CMBS
Warehousing, our range of services has
been extended by a product tailored to our
customers’ specific needs – because it has
been developed directly from their wishes.”
Dr. Stefan Schmittmann,
Member of the Management Board of
Bayerische Hypo- und Vereinsbank AG
