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2021 Lender Outlook “The Pendulum is Swinging”

Today, GSP kicked off our annual MBA meetings (via Zoom) with debt funds, banks, insurance companies, credit unions, CMBS originators, private equity funds and mortgage REITS. The message for 2021: lenders are flush with capital, 2021 real estate allocations are up, lots of capital chasing well underwritten transactions. After a year which included a near shutdown in capital markets for months and conservative underwriting, many lenders are taking an aggressive posture this year.

Vaccinations, a hope for the return to normal life, additional stimulus and continued Fed policy contribute to the optimism in the capital markets. Trends include: Life companies diversifying as they add debt fund originations to their core lending programs. Some are considering uncovered ground up construction loans in addition to the traditional construction perm combos.  Senior lenders allowing/encouraging sub debt to create high LTC capital stacks, banks ramping up construction programs shut down for much of 2020, more non traditional construction lenders, retail and hotel loans being considered (at the right leverage with a good story), floating rates dropping due to increased competition which is pushing originators to be more aggressive on LIBOR floors and tighter spreads. Bridge to bridge lending is available for properties needing more time/money to stabilize as Covid slowed down reposition timelines. Stay tuned. By David R. Pascale, Jr. , Senior Vice President at George Smith