2019 Q2 Data Available

December 18, 2019 • Author: Howard Taylor

As 2019 draws to a close, and Q2 data is available, it’s interesting to examine some stats. Q2, 2019 saw lending from all sources increase. Those sources include banks, GSE’s, life companies, CMBS, etc., as well as alternative sources (funds).

Clearly, bridge financing for seasoning, partner buyout, note purchase, heavy lift, value-add, and note purchase played an important role beyond some demands of years past. This blogger sees little if any significant downturn in the above funding sources future. If anything, the deltas will be mild and short.

Barring any “Black Swan” events, 2020 maybe mostly, more of the same with perhaps some occasional but brief pauses. I envision, a trend toward more portfolio balancing, for on book lenders. One of the biggest distinctions will be between lenders embracing construction loans and those not. As always, traditional lenders will find it difficult to compete on multi-family with GSE’s. Competition over existing cash-flowing commercial and multi-family will be brisk with non-GSE lenders.

The replacement for these traditional sources, being non-recourse lenders, at higher rates. We already see it happening in droves, but perhaps with an even more significant presence, as more traditional lenders herd. Concomitant, the equity requirements, even from the non-recourse lenders will widen. It will be applied not only to the capital stack in total but to the percentage of “skin in the game” by sponsors. We envision an even greater presence of lenders narrowing their lending to existing customers, as their track record and repeat business has been agreeable.

This will become more transparent, the closer the view of approaching the cycle becomes the opinion norm. All in all, regardless of your politics and focusing on human nature, it’s hard to believe the American voter will want change, especially if the economic health of our country is robust on election day.