to more debt vehicles entering the market, spurred on by
low interest rates and favorable real estate fundamentals.
Every major capital source increased their holdings of
commercial real estate debt during the third quarter of
2019, with Fannie Mae, Freddie Mac and FHA leading
the way, according to the Mortgage Bankers Association.
The only note of slight dismay is that equity is becoming
more pointed and focused in its investments.
A FLOURISHING DEBT MARKET
The debt market has been driving CRE financing for several years now, with providers flocking to offer new platforms. Alternative lenders, many of which were traditionally private equity players, have been launching debt
funds and issuing loan products that banks and even large
insurance companies cannot keep pace with.
The key question for 2020 is will this largeness
Some believe there could be a pullback from the
debt side this year. “Recent years have seen a continued
increase in the amount of debt fund financing available
to borrowers, but there are indications that this could
actually somewhat slow in 2020,” says Jeff Lee, president
of Capital One Multifamily Finance. “A lot of funds
started raising capital 12 to 18 months ago, and there
are not a lot of new players being formed today.”
While Lee expects most lenders to grow in areas of
good returns, an uncertain economic outlook could push
others to pullback. “Some banks have begun tightening
credit standards [especially with the general sentiment
that a recession could be near] and we have seen some
balance sheet players somewhat on the sidelines,” says Lee.