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Club Deals, Syndications Step into Conduit Gap

Increasingly, banks are banding together to finance large deals, either as club transactions, or are making syndication a prerequisite to closing.

By Erika Morphy | Updated on April 14, 2008

Few commercial banks are willing to underwrite large CRE deals anymore: anything north of $100 million, and in some cases $50 million-$75 million, represents too much risk for a bank’s balance sheet. That new attitude toward risk would represent a death knell to large loans – except for one saving grace: more banks are banding together to finance deals, either as club deals or more formal syndications.

To be sure, club loans and syndicated deals are not just now appearing on the scene – several months ago, once it became clear that the conduit markets were not coming back any time soon, banks started to revert back to these older-style financings. However, their numbers are only becoming more noticeable now, though, as deal-making ramps up after a dead Q4.

This new trend is both good and bad for borrowers. It is good in that many deals wouldn’t get done otherwise, says Stephanie Lynch, VP of Jones Lang LaSalle’s Real Estate Investment Banking practice in Washington DC. “Anything that injects liquidity in the real estate market is a good thing, as far as I am concerned,” she tells GlobeSt.com.

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