Thinktank’s debut commercial mortgage-backed securities (CMBS) deal, Think Tank Series 2014-1 Trust, came to market in June 2014 for A$113.6 million (US$87.2 million). Think Tank Series 2016-1 Trust followed in October 2016, printing A$280 million. CommBank was instrumental in both deals, arranging the second.

The issuer was not idle between times. Jonathan Street, Thinktank’s Sydney-based chief executive, tells KangaNews: “Investor relations has been an important factor for some time, and in fact we started working with CommBank on a follow-up quite soon after our debut. We have been on quite an aggressive growth path and we were aware that this meant we would need to term out warehouse facilities and recycle capital relatively soon.”

Things started to come together for a second CMBS in the final quarter of 2015 when Thinktank started work on an investor presentation and update schedule. Street echoes CommBank’s views on the ways in which a long-term approach to investor engagement can pay off.

“We actually had relatively modest expectations regarding investor conversion from our pre-deal meetings,” he reveals. “We received good interest but we always expected some investors would prefer to take a wait-and-see approach – as a new issuer they would want us to demonstrate a track record of asset performance before committing to allocate.”

Street reveals that Thinktank would have been happy to convert one or two out of every 10 investors it met ahead of its most recent deal. He adds that the outcome marginally exceeded expectations, but says the issuer regards investor diversification as a long game.

CMBS issuance is a relatively unusual phenomenon in Australia – there are rarely more than two or three deals in any given year. In general terms, however, CommBank believes the local market could support additional asset-class diversity and Street says with the appropriate work ahead of its transactions the issuer found ample investor engagement.

“What we offer is not a nonconforming product, but equally it’s not as common as prime residential paper – I would characterise it as somewhat akin to ‘near prime’,” he explains. “There are not many comps in our segment, so we had to work from the ground up to develop investor comfort. This said, I think investors welcomed the asset-type diversity we offer because they like having a mix of exposures in their portfolios and the yield premium we offer.”

Ongoing growth in the lending book means Thinktank hopes to become a more regular securitisation issuer in future. Street says a third deal in the second half of 2017 is on the cards. The issuer is likely to return targeting similar volume to the total it achieved with its 2016 CMBS. Again, Thinktank is deploying a long-term approach.

“We want to build a track record of deal performance before trying to increase transaction size significantly from what we achieved last year,” he comments. “We are aware that we still have more to prove to the investor market.”