Return of the Portfolio Lender
Tenant In Common sponsors are adjusting to new credit market realities. The old way of financing acquisitions - high LTV loans with extended interest-only periods that were packaged and sold as part of Commercial Mortgage Backed Securities - is no longer available. The large money-center banks that used to make these loans have stopped this type of lending. Another name for these loans was conduit loans. Into this breach, the smart TIC sponsors have approached community banks and insurance companies who make loans and keep the loans on their books. These are known as portfolio lenders. In the heady days of TICs most, if not all, TIC deals were financed with conduit financing. The portfolio lenders were always an option, but TIC sponsors did not want to pay the extra 15 bps to 25 bps that the portfolio lenders charged.

When I started in the business in the late 1980s portfolio lenders were the norm because conduit loans did not exist. I am glad to see the return of the portfolio lender. I think many sponsors will be glad to have a entity behind their loans rather than the faceless world of conduit financing. The TIC sponsors who have found portfolio lenders who understand and are making mortgages to TIC properties are guarding these relationships. Conduit financing will return, albeit not on the terms available before mid-2007. The option of using both is good for the industry.