Nathan VonGunten is a senior vice president at GRS Group. He can be reached at 330.242.1991 or via email at [email protected]
If there is a major economic downturn coming, major lenders in the commercial real estate space seem confident enough to place major capital in the industry.
Commercial-loan closings during the second quarter rose 20.8 percent year over year and 2.3 percent from the first quarter, according to the CBRE Lending Momentum Index.
Banks closed the largest percentage of loans of all institutions and lending groups, making up 35 percent of the total volume, down from 39 percent in last year’s second quarter. Life companies, the second-largest lender, took up 26 percent, shooting up form 21 percent during the same period in 2018. Life lenders, “are actively quoting deals and most have robust pipelines. These lenders are quoting both fixed- and floating-rate deals, with LTVs up to 65%. Many life companies are also providing higher LTVs on select deals through higher-yielding structured loan products,” said Brian Stoffers, global president of debt and structured finance for CBRE Capital Markets.
Other lenders, including REITs, finance companies and debt funds, took up 26 percent, down about three percent from last year.
CMBS, at 13 percent, fell from 15 percent.
However, Trepp recently had some good news about commercial mortgage-back securities delinquencies, which reportedly hit a pre-Recession low in July, at 2.62 percent, a drop of 22 basis points from June and 119 points from June 2018.
Delinquencies started regularly dropping in June 2017, when they were at 5.75 percent and have decreased in 21 of the last 25 months. The all-time high was in July 2012, at 10.34 percent.
In the latest figures, delinquency was lowest in industrial, at 1.7 percent, falling from 2.1 percent three months ago. Office came in at 2.71 percent, a drop from 3.11 percent, while retail was at 4.35 percent from 4.62 percent.
Even though the overall rate is lowest since the recession, some property sectors did experience a bit of a delinquency increase in July. Lodging, the second lowest at 1.8 percent, was up from 1.55 percent, while multifamily rose to 2.04 percent from 1.99 percent.
The largest delinquent loan that was new in July was the Starwood Schulte Hotel Portfolio, totaling $215 million. Coming in second was Ridgmar Mall, in Fort Worth, totaling just under $31 million. The mall, which has lost Sears and other tenants, is undergoing a renovation, including a new gym.
There will always be assets and portfolios with problems, but looking at the overall lending and delinquency picture toward the end of the summer, commercial real estate seems to be on pretty stable financial ground.
About GRS Group
GRS Group is a leading provider of commercial real estate (“CRE”) services worldwide. With offices across the United States, Europe, and affiliates around the globe, GRS Group provides local market knowledge with a global perspective for institutional real estate investors, occupiers and lenders worldwide. The GRS Group team has evaluated and advised on over $1 trillion in CRE transactions.
Through the company’s proprietary management process, Global Services Connection, GRS Group delivers an integrated suite of services including Financial Advisory, Transaction Management, Assessment and Title Insurance. We provide a single point of contact, capable of leveraging the GRS Group portfolio of companies and delivering customized solutions to assist our clients in achieving their investment goals.