Bridger Commercial Funding, the finance company specializing in making property loans for Wall Street to sell as bonds, shut down last week as large banks crowd out smaller players.
The number of competitors ballooned in the past six months, Steven Mumma, co-Chief Executive Officer of Bridger and president and CEO of real estate investment trust New York Mortgage Trust Inc., said in an interview. The New York-based REIT, which said in November it would partner with Bridger to provide mezzanine financing, will continue funding those loans directly, he said.
Bridger, which announced in December 2009 that it would be originating mortgages for sale as bonds, is closing down as Wall Street banks ramp up lending to feed new sales of commercial-mortgage backed debt. Between 20 and 25 institutions are seeking to originate loans they plan to package into bonds, up from about five competitors a year earlier, Standard & Poor’s said in a December report.
“This is the beginning of a shakeout among commercial real estate lenders,” Richard Parkus, an analyst at Morgan Stanley, said in an e-mail. “There are too many lenders, too few loans to make. It’s inevitable.”
Banks have arranged about $6.5 billion in commercial-mortgage backed bonds this year, compared with $11.5 billion in all of 2010, according to data compiled by Bloomberg. Volume plummeted to $3.4 billion in 2009 as credit markets seized. The market peaked with $234 billion in issuance in 2007, Bloomberg data show.
Investment banks hobbled by writedowns on soured loans in 2008 and 2009 have returned to the market for commercial-mortgage-backed securities, increasing competition for lending assignments. Deutsche Bank AG and UBS AG partnered to sell $2.2 billion of the debt last month in the largest offering of its kind since 2007.
Bridger was founded in 1998 to provide smaller property owners access to Wall Street, according to a November statement. It has funded and securitized more than $4.9 billion in loans, according to the company’s website. Bridger’s most recent securitization listed on its website was 53 loans pooled in an offering by Bank of America Corp. in 2007.