RCA Insights

Non-Traditional Lenders Gain Ground

By on March 15th, 2018

Non-traditional lenders are gaining ground in the market for commercial property lending. Our US Capital Trends report to be released next week will show that financial companies and private lenders – largely the debt funds – have been gaining market share in higher risk elements of the lending world.

For the first time our annual analysis of U.S. commercial real estate financing will also include construction lending. The debt funds have been an important and growing source of capital for such lending. Banks, though, remain the primary source for construction lending.

The debt funds have been particularly active as a source of financing for repositioning assets. Equity investors call such repositionings value-add deals. These lenders have been gaining market share for such loans over the last three years.

1803 USCT lenders preview main_US-01

Deal volume fell in February from a year earlier possibly in part due to the uncertainty around interest rates and ultimately the impact on property pricing. Our US Capital Trends report, however, shows that there was no material increase in cap rates for February. Preliminary estimates of the RCA CPPI still suggest price growth overall, but at a slower pace than in the past.

On March 21 Real Capital Analytics will publish the lender analysis issue of US Capital Trends. This edition also reports on February pricing and deal activity across the property types.

Jim Costello

Jim Costello

Senior Vice President
jcostello@rcanalytics.com

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.