Mortgage REITs becoming bigger competitors.

Author:Tucker, Michael

Commercial mortgage real estate investment trusts (mREITs) play an increasing role in the overall market for commercial real estate (CRE) lending, analysts say.

"With between $350 billion and $400 billion of commercial real estate loans maturing annually in 2016 and 2017, Fitch expects commercial mREITs to become more significant competitors to banks' in CRE lending," said Sean Pattap, senior director of financial institutions with Fitch Ratings, New York.

As pure-play debt investors are less regulated than banks, commercial mREITs predominantly originate commercial mortgage loans to hold on their balance sheets, originate conduit loans for securitization sales and invest in commercial mortgage-backed securities (CMBS). Just over a dozen companies make up the commercial mREIT sector, including Blackstone Mortgage Trust, Ladder Capital Corporation, Starwood Property Trust and specialty investors such as iStar Financial Inc.

Collectively, the 13 mREITs held $32.2 billion in total assets as of March 31-- up 52 percent from year-end 2010 and representing roughly 9 percent compounded annual growth. And many mREITs have floating-rate loans holdings, including higher-risk loans on transitional commercial properties, Pattap said, meaning they could...

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