We were back in person for the annual MBA (Mortgage Bankers Association) CREF Conference in San Diego. Nearly all the GSP producers attended and met with numerous lenders of every strata of the capital stack. The overriding narrative: 2021 was a banner year and everyone has increased their allocations for 2022. As one GSP producer commented, “Everyone wants to lend more money and they can care less that interest rates are going up”.
Bridge lending is very competitive. Multifamily is the preferred asset class and will be priced tightly. Several lenders will quote retail, office and even hotels. Some lenders are increasing minimum deal size to bulk up production, but niche lenders remain in the lower loan amount space. Expected rate increases during 2022 will stress metrics on underwriting. Sponsors and lenders will have to evaluate rate risk going forward. Rate caps are getting more and more costly.
Yes, hotel loans are again being quoted by lenders looking for yield. They will be focused on sponsorship expertise and balance sheet strength. Extended stay has thrived during the pandemic.
CMBS lenders are looking to better last year’s post Great Recession record high issuance. In the fixed rate space, we talked to some secondary life companies getting more aggressive on loan proceeds to win business, filling in the space between the more conservative “big name” life companies and CMBS.
The Mezzanine, Preferred Equity, JV Equity markets for bridge and construction are very liquid. Many are offering pay and accrue structures to win business.
Product types: Rental SFR pools continue to mature as a “buy and hold” asset class. More lenders are getting into this space with acquisition/bridge and perm financing options. Other “secondary” product types are thriving including manufactured housing, student housing and self storage.
Bottom Line: It’s a good time to borrow in a highly competitive capital markets environment and fix your rate or hedge before rates go up. By David R. Pascale, Jr. , Senior Vice President at George Smith Partners
