Private Lenders See Investment Opportunities As Banks Pull Back
Investor Bonus: See Exclusive Private Lending Investment Opportunities
As interest rates continue to rise and regional banks get on with the task of stabilizing their balance sheets, more and more traditional lenders are pulling out of commercial real estate lending, making space for private lenders to step in and fill the funding gap...
David Garner
Private Lenders Stepping In Where Banks Are Pulling Out
For owners of commercial real estate such as multifamily apartment buildings, the landscape for financing (and refinancing), is looking pretty grim right now…
Soaring interest rates and the regional banking crisis has resulted in traditional lenders all but disappearing from the commercial real estate lending space.
Of course, every cloud has a silver lining, and this has opened the door for private lenders to fill the gap…
According to debt analyst and ratings firm MorningStar, around $28 billion (yes, billion) in multifamily apartment debt is due to mature this year. Regional banks in the US hold around 70% of all commercial real estate debt (CRE), according to Capital Economics.
According the the FDIC; the two most publicized recently failed banks – First Republic Bank and Signature Bank – held a combined 73.4 billion in commercial loans, much of which is commercial real estate debt.
Little wonder then that the Mortgage Bankers Association recently reported that overall lending is forecast to fall from $816 billion in 2022 to $654 billion in 2023. That’s a significant drop-off of 20%.
Multifamily lending in particular is expected to fall 14% this year to $375 billion from 2022’s $437 billion.
This mass of upcoming debt maturity combined with a lack of new lending for refinancing has created an interesting opportunity for non-bank private lenders to expand into the space.
Already Doing Deals
Private lender Marathon Asset Management, recently refinanced a $24 million construction loan secured against a a 135-unit multifamily building in Savannah, Georgia.
3650 REIT, another specialist private investment firm focussed on private lending recently funded a $58 million loan to refinance a commercial property in Danbury, Connecticut. The firm also closed a $103 million mortgage against 12 properties in the South.
Even Blackstone – the largest private equity and real estate firm – is getting in one the game (surprise, surprise). The company recently said it saw a golden opportunity in the lending space and is “discussing partnerships with U.S. regional banks”.
For Smaller Investors
For those of us who don’t have tens or even hundreds of millions, there are still some excellent private lending investment opportunities around.
Small scale real estate investors are also feeling the pinch. A lack of long-term refinancing options for the popular BRRRR investment strategy is driving many to refinance their hard money loans into bridge loans with private lenders.
These loans are typically paying lenders anywhere from 8% to 15% p.a., with terms from 12 to 36 months, making them an interesting alternative to CDs and savings accounts.
