Greystone's Jenna Unell, senior md in special servicing, and Rob Russell, president of special servicing, answer SCI's questions

Q: Greystone recently purchased its first primary B-piece in a US$1.09bn conduit CMBS. What makes now the right time to enter this market?
RR: We purchased what was C-III Asset Management at the end of 2019, just before the pandemic, and we are working towards growing that business - which was special servicing. The best way to grow that business is to be an active buyer in B-pieces in the conduit market, so further into that strategy we bought some transactions in the secondary market. This is our first new issuance transaction and so it was very important to us, and we saw that this was the best way to do it.

We intend to be an active participant - we really like the yield on the B-piece, and we have the staff and expertise to underwrite the underlying collateral. At Greystone, we have roughly 50 people in Dallas that assist us with this, and we think we are a perfectly positioned player.

Q: What are you hoping is Greystone’s role as a participant within the B-piece market?
JU: We have obviously seen that the flow has decreased, but we certainly see opportunity still in this market as we move forward within it. Greystone is very well positioned to be a B-piece buyer because we have the ability within our own group to complete all of the due diligence, as well as being able to name ourselves as a special servicer on those deals too.

Q: Where does purchasing CMBS B-pieces fit into the wider Greystone strategy?
RR: It is really a full circle operation. By definition, a conduit is always going to be a broad range of collateral and - like with anything - there will be certain deals you like more than others. However, with where the market is now with the underwriting - especially compared to, say, CMBS 1.0 - the underwriting is better, the collateral is better and the sponsorship is good.

The issuer (BANK 2022-BNK43) that we purchased from in this transaction are really solid underwriters, which gives us a lot of comfort too because, when you are in the position to buy a B-piece, you look at who the issuers are, find out what their collateral standards are, assess that they know all top-notch underwriters, have good origination and have great credit. So that certainly helps us get our arms around it and get comfortable with the position.

Q: How do you expect Greystone will differentiate itself from the larger B-piece purchasing players?
RR: First of all, our team down in Dallas has a tremendous amount of experience. A lot of B-piece players will use third-party underwriters, but we are able to do this in-house – which not only allows us to work quicker, but also allows us to better evaluate the risk in a certain security than some who are in our peer group.

One of the reasons we are in the B-piece business in special servicing is that it lines up with Greystone’s efforts as a conduit originator with our CMBS platform. I think it’s a great story for originators to say to potential borrowers in the B-piece space that we are buying our own B-pieces.

So, if we tell you that a loan is good to go, you won’t hear from another B-piece buyer re-traded us or wants to change the terms of the structure. So, it’s just a really good pairing with our CMBS platform, which we work closely with and as that ramps up in the future, we expect to do a lot more with them.

Q: What are the prospects for development of the CMBS side of Greystone’s business?
RR: We redesigned our CMBS platform at the beginning of the year, which is now growing, and we expect that platform will have a lot of origination capacity and see a lot of transactions. As that increases, we will look at purchasing B-pieces we contribute into.

Right now, our B-piece strategy going forward is - like in this transaction - that we have gone out and been a contributor in the transaction, but we are kind of independent of that. Going forward, the idea is that we will work closely with them and look at their deals. Now, exclusive to the Greystone-pond, we can do what we just did and buy B-pieces that Greystone is not a part of - so we’ll do it both ways.

This is a core business for us that we really want to build. We didn’t buy the C-III Asset Management company to let it flounder - we want to grow the business in line with our wider strategy. Any business that we enter, whether it is CMBS or special servicing, we tend to grow those businesses - and that’s the mantra of the firm.

Q: How will Greystone’s expansion into buying CMBS B-pieces benefit the broader market?
JU: I think that competition is good in this market. There may be some buyers that drop out as the market changes, but we have a reason to be here, and it is a part of our wider plan to build an entire CMBS platform as well as our special servicing business.

We are also quite different to a lot of the other active B-piece buyers that are currently in the market because we have this special servicing platform – it means we can control our ability to do the due diligence on these deals. It is difficult to break into this market, but ultimately it benefits everyone if there are more players available to be active in this market.

Claudia Lewis