Spencer Gray’s Post

IT’S A GREAT TIME TO BE A REAL ESTATE LENDER. Rachel Markus, USC's Director of IR, and I had a whirlwind, engaging and productive 48 hours, catching up with and making new industry friends at APEX - America Property Expo and Carmo Companies The Real Estate Meeting East this week. Reach out to IR@uscnyc.com for more highlights and to learn about Urban Standard Capital’s real estate private credit platform. A few takeaways from wonderful panels: Investor appetite and interest for Real Estate Credit is GROWING Borrowers wary of new private lenders entering the market without a track record of executing and servicing loans. Magnitude of opportunities is unprecedented given wall of loan maturities and retrenchment from banks. Private credit continues to gain market share Declining interest rates will see real estate transactions pick up as market gains confidence but 100-150 bps of rate relief won't be sufficient to bring values to a place where most assets can refinance without putting in fresh equity Be cautious of assuming values recover quickly and basing business plans around that (refinancing, sales tied to cap rate compression) in the near term Values of the past may not be indicative of future values - we are coming out of a 15-20 year bubble - and that may simply not be the environment we are coming back to. Low interest rates created "sugar high" Anticipate elevate defaults for next 3-5 years as we work through a new interest rate and capital markets environment Banks not a competitor to real estate lenders; increasingly seeking private lenders to partner with to service their clients The dislocation in the capital markets the last two years resulted in fewer projects being built so expect more pressure on rents given supply constrains The % of income going to housing going to continue to increase given lack of supply The continued escalation of operating expenses including labor, utilities and insurance combined with construction costs and investor (both debt and equity) return expectations make building new housing a challenge Thank you Roy Carmo Salsinha and Cathy Guo #RealEstatePrivateCredit #RealEstateConferences #RealEstateInvesting

Benefits of Strong Credit for Real Estate Investors Establishing a solid credit foundation has several benefits for real estate investors: Lower Interest Rates on Loans and Credit Cards: A good credit score typically entitles you to lower interest rates, which means you’ll pay less over the life of loans and credit balances. Higher Chances of Loan Approval: Lenders see individuals with good credit as lower-risk borrowers, increasing their chances of getting approved for loans. More Negotiating Power: A strong credit score can put you in a position to negotiate better terms or interest rates with lenders. Higher Credit Limits: Lenders are more likely to extend higher credit limits to those with a history of on-time payments and responsible credit management. Easier Approval for Rental Homes and Apartments: Landlords often check credit scores during the rental application process. A good score can make it easier to secure a rental without the need for a co-signer. #creditandlending #creditscore #credittips #realestateinvestor

Multifamily lending, which is included in the overall figures, is projected to grow to $297 billion this year, up 21% from last year's $246 billion. Looking ahead to 2025, the MBA anticipates total commercial real estate lending to climb to $665 billion, with multifamily lending accounting for $390 billion of that total.

🏙️ Navigating the Complexities of Commercial Real Estate Financing in Today's Market 📈 As inflation continues to hold steady, the Federal Reserve's decision to postpone expected interest rate cuts has posed challenges for commercial real estate lenders and borrowers alike. With nearly $929 billion of outstanding commercial mortgages set to mature this year, finding solutions in a climate of rising rates has become paramount. In a recent report, Alan Todd, head of research for U.S. commercial mortgage-backed securities at Bank of America, highlighted the increasing trend of troubled loans being retained by lenders, awaiting potential rate cuts. This cautious approach, while providing temporary relief, underscores the urgency for sustainable solutions in the face of uncertainty. Amidst this landscape, borrowers facing impending loan maturities are exploring refinancing options. However, the terms offered often exceed expectations, reflecting the broader market dynamics. Despite these challenges, recent loan modifications indicate proactive efforts by lenders to address problem loans. By negotiating refinancing or extensions, they are navigating the complexities of today's market with resilience and adaptability. As we navigate this evolving landscape, it's essential to stay informed and proactive. Let's continue to collaborate and innovate to ensure the resilience of the commercial real estate sector in the face of ongoing challenges. 💼🌟 #CommercialRealEstate #Finance #MarketTrends #Resilience #Innovation #finance #accounting #realestatemarket https://lnkd.in/gHyf82WK

🌟 Multifamily Distress Rate Nearly Doubles in April 🌟 The multifamily sector is facing significant challenges, with the distress rate almost doubling in April, reaching a record 8.35%. 📉 According to CRED iQ, multifamily properties led this increase, with distress rates jumping from 3.7% in March to 7.2% in April. Multifamily CMBS loan special servicing rates rose to 5.1%, the highest since June 2017. Over $1.62B worth of multifamily CMBS loans were transferred to special servicing in April. As interest rates rise and multifamily property values drop by 20-30% from 2022 peaks, refinancing challenges are likely to increase distress numbers further in the coming months. #MultifamilyRealEstate #RealEstateTrends #PropertyManagement #RealEstateInvestment #CMBS

Rising Re-Defaults in the Commercial Real Estate Market: What Investors Need to Know In the Globest article below, Erik Sherman reports that recent insights from the Financial Times underscore growing concerns in U.S. commercial real estate (CRE) as "double defaults" on property loans surge. Banks’ dependence on "extend and pretend" strategies—temporary loan modifications intended to defer losses—is under increasing pressure, especially as high interest rates make it harder for borrowers to maintain their debt obligations. According to Federal Reserve research, these lenient loan practices may misallocate credit and heighten financial instability, particularly as modified loan re-defaults have increased 90% this year, reaching $5.5 billion by September. Office spaces, retail centers, and apartment buildings are among the hardest-hit sectors, contributing to $26 billion in delinquent loans—a 25% increase from last year. In this complex environment, HannaCRE is positioned to support CRE investors, sellers, and owners in the DC Metro area. With deep expertise in buying, selling, and leasing commercial properties, we offer critical guidance to help mitigate risks associated with rising defaults. Our comprehensive market insights, investment strategies, and transaction support ensure clients are well-prepared to navigate this evolving landscape. Reach out to HannaCRE for strategic guidance and secure your investments in Washington DC’s dynamic commercial real estate market. #CommercialRealEstate #CREInvesting https://lnkd.in/euG3j6dq

Ruh Roh : ..."when interest rates shot up, imperiling borrowers’ ability to make payments on Arbor’s loans that were often repackaged into bonds and sold to investors. Now, the company is contending with a wave of property owners struggling to pay interest on their floating-rate debt….The company sits at the center of what a growing number of analysts say is one of commercial real estate’s biggest trouble spots: floating-rate apartment loans. “Multifamily could be the next shoe to drop,” said Jade Rahmani, a real-estate stock analyst at KBW.” "Arbor stands out because of its size. It is one of the largest publicly traded companies focused on floating-rate multifamily lending. The real-estate investment trust is one of the country’s most-shorted companies, according to MarketWatch. Arbor has also attracted attention because it frequently issued high-leverage loans for risky projects and to borrowers who have owned properties before but in some cases have little experience running vast portfolios of rental apartments." https://lnkd.in/e6ZTH8-3

Office CRE remains under stress, which means office CRE-backed loans remain under stress. "Foreclosure activity jumped by 117% year-over-year in March, real estate data provider ATTOM reported on Wednesday. That indicates 625 foreclosures, a stark contrast to the pandemic lows, where foreclosures bottomed at 141 in May 2020. .... With billions in commercial debt maturing, tighter monetary policy has forced borrowers to either refinance at higher rates or sell their properties at steep discounts. For those that extend their maturities, analysts worry it's just delaying a wave of distress, with $2.2 trillion in debt coming due by 2027." #CRE #credit #default #foreclosure #rates #economy #banks

Office CRE remains under stress, which means office CRE-backed loans remain under stress. "Foreclosure activity jumped by 117% year-over-year in March, real estate data provider ATTOM reported on Wednesday. That indicates 625 foreclosures, a stark contrast to the pandemic lows, where foreclosures bottomed at 141 in May 2020. .... With billions in commercial debt maturing, tighter monetary policy has forced borrowers to either refinance at higher rates or sell their properties at steep discounts. For those that extend their maturities, analysts worry it's just delaying a wave of distress, with $2.2 trillion in debt coming due by 2027." #CRE #credit #default #foreclosure #rates #economy #banks

With a predicted rise in commercial real estate lending to $665 billion by 2025 and multifamily lending reaching $390 billion, the sector is set for a strong recovery. 🚀🏘️ A moderation in interest rates and upcoming loan maturities are driving this growth. #RealEstateForecast #CommercialLending #InvestmentOpportunities