Salomon Bros. launches commercial mortgage conduit

Real Estate Weekly, April 13, 1994

Salomon Brothers has announced the formation of a commercial mortgage origination program for retail and industrial properties. Through a venture between its subsidiary, Salomon Brothers Realty Corp., and RFG Financial, Inc., a commercial mortgage bank, Salomon Brothers plans to book a minimum of $500 million of such loans per year. RFG sources, underwrites and closes the loans which are funded by Solomon Brothers for subsequent securitization.

RFG is a joint venture between Reckson Associates, a New York real estate development and property management firm, and Metropolitan West Securities, a Los Angeles based institutional investment adviser. The company employs an innovative loan process that allows loan requests to move directly from quote to commitment in two weeks or less, bypassing the application stage completely.

Anchored projects with credit tenants are preferred, although RFG will also make loans on unanchored projects in prime retail locations. Loans range in size from $3 million to $15 million, are non-recourse, carry 25 years amortization and require that projects be at least 85 percent occupied. Loan terms range from 5 to 10 years.

Scott Rechler, chairman of RFG, explains, "We bring a unique perspective to mortgage lending due to our long history as developers; we understand the real estate issues as well as the borrower's needs." He adds that for good quality properties, RFG can tailor its program to address issues such as short term leases, varying credit quality of tenants and specialty or discount marketing strategies. Loans are also available for acquisitions and mortgage buydowns.

According to Mason Haupt, Managing Director and head of Mortgage Trading at Salomon Brothers, the conduit program with RFG is a natural direction for Salomon given its long standing expertise in the underwriting and placement of commercial mortgage debt. He states, "We look forward to working with RFG and providing mortgage financing for retail and industrial properties through the issuance of mortgage-backed securities."