Commercial Property Executive – The Rise of CMBS

(Originally posted on

As Commercial Property Executive celebrates its 30th anniversary, we’re taking a look back at the most significant events in commercial real estate’s history. Stay tuned for our weekly posts highlighting these critical points, and follow along with us on our site and your favorite social media channels using the hashtag #CPETurns30. 

The Resolution Trust Corp.’s success with securitization gave insight to a new rising star in the financial markets. Andy Stone, who worked as a mortgage trader under Lewis Ranieri at Salomon Brothers, saw potential in parlaying Ranieri’s success with residential mortgage-backed securities and some securitization of individual CRE loans, leading him to market the expansion of this idea to Daiwa Securities. In 1990, Stone began using the firm’s money to buy up large pools of CRE loans from the RTC and buyers of RTC properties, repackaging them and selling off tranches of the securities. With the transactions proving profitable, the idea caught on in Wall Street and the CMBS market was born.

As the U.S. economy emerged from the recession in the mid-90s, investors began to buy property again. But they found mortgage capital limited as commercial banks, insurance companies, pension funds and other traditional lenders remained cautious. Ethan Penner saw an opportunity for Wall Street investment banks to fill the void, particularly Norma Securities, which agreed to back his plan in 1993. Penner was able to build the business to $10.8 billion in conduit and large loan deals, first under the Nomura Asset Management name and then Capital Corp. of America, before an effort to restructure the relationship fell apart in 1998. Penner is credited for his role in expanding the use of CMBS, making it a regular means of financing property purchases and creating large pools of mortgages before securitizing them. Penner went on to found and serve as president of CBRE Capital Partners in 2008, before the firm substantially exited all investments in 2014. He is now the founder & managing partner of Mosaic Real Estate Investors.