By Jim Costello on October 30th, 2019
Data analysis by Mike Savino
Non-bank lenders have been a growing feature of the U.S. lending market over the last four years. Real Capital Analytics groups these so-called debt funds into our financial/fund category. Traditionally, this category encompassed the mortgage REITs and hard money lenders. Into this cycle though, the debt funds have been a growing presence in the market across all investment styles.
The debt fund lenders are typically leveraged lenders and need a higher rate of return on loans originated in order to make good on commitments to investors in the funds. This return requirement has pushed these funds into higher risk lending such as lending on value-add and opportunistic investment styles.
Looking at trends in construction loans as a proxy for lending into opportunistic investment styles, clearly the debt funds have taken off over the last four years. In 2015 these lenders captured only a 7% share of the market but this climbed to a 22% share by the middle of 2019.
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