RCA Insights

Chart: US Debt Funds Carve Bigger Slice of Lending

By 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.

Real Capital Analytics publishes an in-depth analysis of the lending market twice a year as part of US Capital Trends. To learn more about how to receive these reports, contact our team.

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Jim Costello

Jim Costello

Senior Vice President

Jim Costello has worked in the CRE space on issues of urban economics since 1990, including a 20-year stint at Torto Wheaton Research. Jim expanded the reach of the Torto Wheaton Research team developing forecasts of global market fundamentals. He also developed approaches to pair the forecast results with frameworks to answer investor questions on asset values and relative investment opportunities.

In the aftermath of the Global Financial Crisis, Jim provided advice to the Treasury Department and helped educate these professionals on commercial real estate performance. Jim is a member of the Commercial Board of Governors of the Mortgage Bankers Administration, where he helps policy makers understand the commercial real estate industry.

Jim is expanding the capabilities of the Real Capital Analytics team on issues of real estate market dynamics. Jim has a master’s degree in economics and is a member of the Counselors of Real Estate.