Positive signs for CRE lending in 2018 amid strong market: report

Delinquency rates of maturing pre-recession CMBS loans were lower than expected

(Credit: Pexels, Public Domain Pictures)
(Credit: Pexels, Public Domain Pictures)

The delinquency rate on CMBS loans came in nearly a full percentage point lower than a year ago, a positive indicator for lending in the year ahead, and bucking the gloomy predictions the industry has long been hearing.

The rate in February was 4.51 percent, down from 5.31 percent in February 2017, according to CMBS analytics firm Trepp. That’s despite a wave of maturing CMBS loans packaged in 2006-2007, just before the subprime mortgage crisis.

Experts worried that wave of debt would slow down lending, but low interest rates, strong real estate values and a diverse pool of debt capital have allowed borrowers to refinance and restructure maturing debts, according to the Wall Street Journal.

There’s still plenty of options for borrowers — bridge loans from insurers and other non-traditional lenders are available, and lending activity from Fannie Mae and Freddie Mac hasn’t slowed down in the multifamily sector.

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Gerard Sansosti, an HFF executive managing director, told the Journal that 2018 “will be a year of plenty of liquidity in the debt space. We don’t’ sees any lender looking to do less this year.”

The high value of real estate has also enticed investors into debt financing over equity. A December survey of 550 institutional investors by data firm Preqin found that 42 percent were looking to expand their allocations in private debt, according to the Journal. [WSJ] — Dennis Lynch