Credit Participation Certificates (CPCs) represent a potential seismic shift in the way we go about financing both commercial real estate ADC proposals as well as acquisition proposals. The CPC approach provides a welcome boost to the collateral underwriting requirements of the underwriting review process and the liquidity necessary to fuel both primary and secondary market transactions. The primary and secondary market support approach is the most important way of moving this important tool to the forefront because it represents a complete loop of funding, just as FannieMae provides the secondary market outlet for lenders and investors today of multifamily property portfolios.
We have spent some time investigating this trend and found the market is already developing at a record pace. UFT Commercial Finance has a comprehensive program structure already in place to support this credit instrument’s use and trading. UFT has even taken this idea to its ultimate level by creating a “Master CPC” which includes a conduit-style set of underwriting standards and other ingenious toys that speak to increasing transaction velocity, lowering barriers to entry and increasing overall capital access opportunities. UFT is already operating on a worldwide basis with their platform.
All of this begs the question of whether the traditional funding approaches will still be relevant five (5) years from now, or like many seemingly stalwart bets, will go the way of Blockbuster, Sears, Brookstone, et. al. by virtue of a market disruption caused by the advent of CPCs filling the void of an inefficient, expensive and antiquated commercial banking system approach that is long overdue for remodeling itself.