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Ready for new securities opportunities?

Abroad range of new business opportunities are opening for financial service firms, as the long-anticipated market for commercial mortgage securities takes off at last, a leading finance advisor has told the Mortgage Bankers Association at its national conference in San Francisco

But Carl Kane, managing director of management advisory services for Kenneth Leventhal & Company, warned that leaders must quickly and systematically evaluate their strengths and weaknesses to find where in the "securitization pipeline" their best opportunities lie.

"A very wide array of attractive fee-based services is taking shape, but there are key strategic decisions to be made and, new disciplines to be mastered for those who expect to benefit," he said. "The time to address this is now. "

Evaporation of traditional capital sources and the Resolution Trust Corporation's extensive use of commercial securitization in the current year have spurred significant growth of the market, Kane explained. He observed that the RTC "deserves much of the credit for jump starting the market and expanding, the investor base."

With some $340 billionof bullet loans soon coming due for refinancing, and huge bank asset portfolios still in the hands of federal agencies - including the Federal Deposit Insurance Corporation, which hasn't yet begun its own securitization program - the market will continue to row rapidly, he said. In addition, the pending restructure of numerous bank and insurance company real estate portfolios should lend extra impetus to the market's ixpansion, he added.

"Even though this is still an early stage of growth, we're already beginning to see clear segmentation among investors in terms of yields and risk levels," he said. "And I expect that before long; there even will be a retail market for commercial mortgage securities."

Kane, who helped develop the models used by rating agencies to evaluate the safety of commercial mortgage securities in the mid-1980's, told his audience they should respond quickly to basic changes now occurring in capital formation.

"New players are coming on the scene, old ones will fall by the wayside, and those who remain will alter their businesses in various ways," he said. "With careful strategic planning, now is the time to pick your course and grow as the market evolves." Mr. Kane gave his audience an view of the securitization process and some of the many areas in which financial institutions and other service-providers can play vital roles.

He urged his listeners to "intensively examine each individual function in light of your own unique abilities, while incorporating all the key strategic issues. It's a big job, so let's get on with it."
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Title Annotation:advice on new business opportunities for financial service firms
Publication:Real Estate Weekly
Date:Dec 9, 1992
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