In a recent roundtable discussion, industry giants LaSalle Investment Management and CIM Group shared their insights on the looming $1.5 trillion debt maturity wave in US commercial real estate. This discussion comes at a crucial time as traditional banks continue to pull back from the CRE lending market, creating unprecedented opportunities for alternative lenders.
Key Takeaways:
- Secular Shift: Dan Schapiro from CIM Group highlighted a significant move from bank to private lending in CRE, stating, "We expect banks will focus more on the back leverage side because of the way their capital is treated. They will increasingly be providers of structured credit products to private lenders rather than lending directly to real estate."
- Underwriting Standards: Despite the favorable market for lenders, LaSalle's Isabelle Brennan emphasized the importance of maintaining strict underwriting, noting, "One of the things that investors value most is that no matter what type of market you are operating in, you don't compromise on your underwriting standards."
- Refinancing Opportunities: The article cites MSCI research estimating "close to $820 billion of US commercial property loans will mature in 2024," with Schapiro adding, "Over $1.5 trillion of loans are predicted to mature over the next three years, and the first stage of that wall of maturities is probably starting now."
- Favored Sectors: Brennan stated, "Today, a lot of us like the multifamily sector and industrial. We particularly like multi-let industrial, for the granularity of the income it offers." Schapiro also mentioned CIM is making a "big push" into limited-service hotels.
- Problem-Solving Edge: Eric Smith from Locust Point Capital noted, "If the borrower runs into an issue, they can sit down with us and problem-solve. Banks are so constrained in this environment that they don't have that ability."
Our Opinion
This news accurately captures the current state of the US alternative finance lending market and the potential for growth in the coming years. The increased interest from institutional investors in real estate debt strategies, coupled with the retreat of traditional banks, creates a favorable backdrop for alternative lenders. By focusing on key sectors like multifamily and industrial, and by maintaining rigorous underwriting standards, alternative lenders can capitalize on the opportunities while managing risk effectively.
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