Lending tree: Real estate debt funds now have $57B to deploy

The record amount could increase competition, prompting lending on riskier projects, industry pros say

Oct.October 23, 2018 01:30 PM
Debt funds have some $57 billion to invest. (Credit: iStock)

Real estate debt funds have a mountain of money to deploy, a staggering amount that could lead to more lending on risky projects, some industry pros say.

These funds now have $57 billion to lend as construction loans, bridge loans and other risky debt, according to the Wall Street Journal.

“People are concerned about all that capital chasing limited opportunities,” said Tom Carr, head of private debt at alternative capital tracker Preqin.

Following the financial crisis, real estate debt funds and other alternative lenders stepped in to fill the void in available capital left by institutional lenders.

These alternative lenders handed out $60 billion in loans last year, a 40 percent increase over 2016, according to the Journal. They now have a 10 percent share in the real estate lending market, up from 2 percent in 2014. Developer Larry Silverstein set up his first lending venture, Silverstein Capital Partners, this year.

Risky loans are finding their way into commercial mortgage-backed securities as well. Around 73 percent of all loans in CMBS in the first nine months of the year were interest-only loans that can be problematic when they mature, if rates are higher or property values lower, according to the Journal.

That’s up from 30 percent in 2012 and higher than the pre-financial crisis peak of 60 percent. Debt funds continue to seek more capital — there are 106 on the market looking for $40 billion to invest.

Still, uncertainty over interest rates and other market factors has some in the alternative lending industry playing the market conservatively. [WSJ] — Dennis Lynch 

Related Articles

From left: Gavin Newsom and David Chiu (Credit: Getty Images and iStock)

Will rent control dent the multifamily market? Lenders, investors weigh in

East LA Community Corporation President Isela Gracian, CIT Bank President Robert Rubino and the two projects

East LA Community Corp. lands $55M in loans for affordable housing projects

Acres Capital CEO Mark Fogel with a rendering of project

Chateau Group scores $44M bridge loan to build Marriott-branded hotel in Arcadia

Colony Capital's Thomas Barrack

Tom Barrack’s Colony Capital snags $1.7B refi on healthcare properties

Geoff Palmer and Orsini II

Geoff Palmer nabs $128M refinancing on DTLA resi complex

The Homewood Suites by Hilton in Chicago (Credit: Google Maps)

Hilton, Marriott and Hyatt-focused hotel REIT closes $1B refi amid industry growth

Deutsche Bank CEO Christian Sewing, Hackman Capital CEO Michael Hackman and a rendering of Culver Studios

Hackman just got more financing for its mega-expansion of Culver Studios

Decro Corp. secures additional funding for affordable housing complex in Lincoln Heights