Sabal Capital Holdings has rolled out a commercial mortgage-backed securities trading business that will focus on agency loan securities, hiring veteran trader George Geotes from Credit Suisse to spearhead the effort.
The launch of SCH Trading comes after the Irvine, California-based company sold its commercial real estate lending business to Regions Bank last month. The sale was part of Sabal’s broader plan to re-focus all of its energy on its core investment management business through which it makes opportunistic debt investments, CEO Pat Jackson told Real Estate Capital USA.
The trading business will initially focus on agency securities, particularly those backed by Ginnie Mae loans, and complement the firm’s existing investment business. This market has historically been dominated by large commercial banks like Credit Suisse and JPMorgan, but these firms are de-emphasizing this business because of capital constraints, Jackson said. Sabal will aggregate CUSIP securities before exiting the positions via a REMIC securitization.
Selling its lending platform made it easier for the firm to trade agency securities and commercial mortgage-backed securities. “We have long held that having a more real estate investor-centric partner counterparty to the originators for this product makes more sense,” Jackson said.
The timing of the move also stems from an increase in the US government providing more workforce and affordable housing rental financing and increasing targets for agency multifamily loan originations. The Federal Housing Finance Agency last month set a combined target of $156 billion for Fannie Mae and Freddie Mac lending in 2022, roughly a $16 billion increase from 2021 due to the expected growth of the multifamily market. About half of that is being earmarked for affordable housing, the FHFA said in a statement.
“We have an investment management business that has long-term, discretionary locked up capital,” Jackson said. “Having that kind of durable capital base in place at a time of uncertainty is incredibly valuable [and allows us] to be able to leverage that kind of business model into different areas that otherwise might get disrupted.”
Jackson noted that being able to hire Geotes means that the platform will get a solid start. Geotes spent more than 17 years at Credit Suisse, where he most recently was in charge of the firm’s agency CMBS trading desk and oversaw the securitization of more than $76 billion of agency MBS.
“The timing was really perfect,” Jackson added. “He has deep industry expertise in terms of this type of trading, not just for Ginne but for other securities. We think there’s a real opportunity to build on his expertise to build out the business.”