Boston, Massachusetts (November 2, 2022) – Michael Chase, senior vice president/managing director of Northmarq’s Boston debt/equity team, said: New England Real Estate Journal That’s what we look to 2023 and what it brings to the industry.
It may only be the beginning of November, but it may already be the end of the year for commercial mortgage borrowers and practitioners. With a few rare exceptions, most new loan requests he could be funded in 2023. Even in times of fluctuating interest rates, many commercial real estate (CRE) lenders have already met or exceeded their origination goals. There are already several lenders working on the new fiscal year. Meanwhile, many others are stepping away from the gas for now and looking to what the new year will bring.
What can CRE borrowers look forward to in 2023? We are certainly in a high interest rate environment and market conditions continue to make the next rate cut even more likely. Underwriting is expected to be tighter as lenders focus on exit strategies and refinancing risk. The good news is that we still have plenty of capital available. The new year could bring new competitiveness from lenders looking to fill new quotas.
banks and credit unions
Banks and credit unions remain the largest holders of CRE mortgages. This group includes multinational banks to local thrift institutions. Large money center banks are currently sitting on the sidelines and not actively lending in the CRE market. There are many reasons for this, including consumer credit and regulatory pressure combined with exposure to warehouse facilities. The most competitive venue for borrowers is the banks and credit unions that occupy the middle market. Despite aggressive Fed Funds Rate hikes to stem inflation, this has yet to be fully reflected in the increased cost of capital for these lenders. Many of them are in price discovery mode and may be selectively aggressive for the right opportunities. can be enhanced by the opportunity to obtain
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Institutional investor activity is expected to remain brisk. Although a small percentage of the total commercial mortgage market, we can offer attractive terms to conservative borrowers seeking long-term, fixed-rate capital without a personal guarantee. An inverted yield curve offers relative value to long-term holders.
Agency Renders (Fannie Mae, Freddie Mac, FHA)
Multifamily continues to thrive, benefiting from agency lenders willing to provide liquidity to the space even during a recession. Demand for apartments is likely to continue as rising mortgage rates constrain the housing market. An owner of a property that offers an affordable price and meets the agency’s mission-driven goals can expect his 30-60 basis point discount within the normal market price range.
Private debt funds, mortgage REITs, and other sources of alternative capital can be expected to fill some of the void left by other lenders. These lenders will likely need to fund some construction loans and certain assets, which can be difficult to process by more traditional lenders. Over the past few years, the alternative lending space has steadily expanded. However, it may drop out of groups that lack strong balance sheets or rely too much on warehouse lines.
Not all doom and gloom are there. Borrowers with lump sum upfront structures such as SWAP, defeasance and yield maintenance are beginning to find that higher short-term interest rates allow them to repay their existing loans with minimal penalties and, in some cases, financial gain. Loans with underwriting clauses can increase transactions if favorable terms are passed on to new borrowers. Difficulties for one may lead to opportunities for others.
Northmarq provides commercial real estate investors with access to experts in debt, equity, investment sales and loan services to protect and add value to their assets. For funding sources, we offer partnerships and financial insight to support your long-term and short-term investment goals. Our culture of integrity and innovation is evident in his 60-year history, $20 billion in annual trading volume, over $80 billion in loan servicing portfolio, and multi-year tenure of over 700 employees. is.