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Berkshire Mortgage Venture Puts Capital Behind New CMBS Program
Berkadia Commercial Mortgage LLC, the servicer backed by Berkshire Hathaway Inc., said it plans to use its own capital to fund a least $200 million in loans to be securitized and sold to investors.
The fixed-rate loans, aimed at inclusion in commercial mortgage-backed securities, will be available at the beginning of 2011, the Horsham, Pennsylvania-based company said today in a statement. The program, which will focus on mortgages of $5 million to $25 million, will help Berkadia win business from brokers that don’t issue loans with their own capital, Senior Vice President Joseph Franzetti said in an interview.
“It’s going to make us much more competitive with other mortgage bankers,” said Franzetti, who will manage the program. “If you have the ability to provide capital to borrowers I think it makes you a better place to go.”
Berkshire, led by Chief Executive Officer Warren Buffett, 80, and Leucadia National Corp. created Berkadia from the mortgage-lending business they bought last year from bankrupt Capmark Financial Group Inc. Berkadia earns income by servicing $215 billion in mortgages. Its team of about 100 mortgage bankers also matches borrowers with sources of capital outside the company, said Joyce Patterson, a spokeswoman for Berkadia.
Demand for financing may increase as existing debt matures. CMBS sales may jump to $25 billion to $41 billion in 2011 from about $8.2 billion this year, according to a Citigroup Inc. report. Issuance tumbled 95 percent to $11.2 billion in 2008 from a record $234 billion in 2007 as the credit crisis sapped demand.
Berkadia was granted a 50 percent increase in its secured credit facility as it seeks to expand its servicing and loan- origination businesses, the company said in a Nov. 5 filing. Omaha, Nebraska-based Berkshire and New York-based Leucadia increased the line to $1.5 billion.
The company will seek to make loans on offices, retail buildings, warehouses and apartments, Franzetti said.
To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net.
To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net.
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