“More lenders in more places” may be good news to some borrowers, but not all, according to an influential commercial real estate analyst.
Sam Chandan, the president of Chandan Economics and former chief economist for Real Capital Analytics, says that while reengaged lenders and easier access to financing may be a plus to more modest borrowers, the easing of credit doesn’t do much for the secondary and tertiary markets and markets for value-add investments.
“For both debt and equity, uncertainties related to the underlying economics of property performance matter more in these markets,” Chandan wrote in the New York Observer. “Their smaller scale entails more limited liquidity and a stronger anchoring to income. The secondary-market lag has widened sufficiently over the last year such that investors and lenders have inevitably come in search of yield.”
Forces are at work to influence the quality of loans as well, including the much-discussed wave of CMBS loans slated to mature over the next few years. Chandan said that would present an opportunity to investors seeking high-yield distressed debt.
Chandan also predicts that lenders who can tell the difference between risky and very risky will see their market share grow after the market peaks and competitors “have been waylaid by their own balance sheets.” [NYO] -- Angela Hunt