Can anyone give their insight into the world of nonbank lending. We are seeing a rise of all these companies such as RXR Starwood and Moinian getting into this playing field since banks are becoming more regulated.
My question would be why these companies see lending as attractive. Is earning a 7% IY return less risky then buying and developing? Also how do they issue 50-100m of dollars? through warehouse lending? Do they give 100m dollars in one shot? Thanks
i don't work on the senior debt side, but it is of course always possible that they sell a less risky piece at a premium to a buyer looking for a single-digit yield at a price that allows them to hold the remainder at a double-digit yield.
Most of the time they are levering their debt and selling coupons to other financial institutions. on a deal with a 7% floating rate they can be making lower teen returns.
Can you elaborate/go into more detail?
2 ways to do it:
1) Split A/B piece with another lender: 90% LTV at 3m LIBOR + 5.5% and 1.25% fee can be broken down to:
2) Levered 2-3 times: 90% LTV at 3m Libor + 5.5% and 1.25% fee can be financed with 2/3 borrowed money:
Plus the B-piece usually service the loan so you earn another 5-7 bps on the entire piece, this equates to another 18-25 bps of servicing fee.
In todays world of low rates and low cap rates, if you just want steady cash flow, what's wrong with 7% yields? Nothing...
Many of the private lenders I know who were once in the real estate game got burned out and now just lend. Yields are 8% to 10%. I know a private lender with about $250mil under management. They make 50bps on the servicing. Not bad after collecting 1.5pts per loan too.
Lots of ways to make money out there in lending.
Non-bank lending companies - where do they get money to lend? (Originally Posted: 08/21/2014)
Typically commercial banks take in deposits, and then make money by lending that money out to businesses.
But how do non-bank institutions get money to lend out? GE Capital and CIT Group are two big ones I'm confused about. They're both big names in middle market lending, but neither actually take deposits like traditional commercial banks do. So where are they getting the money to lend out?
***I know CIT Group recently established CIT Bank, a bank holding company that just bought OneWest Bank. But what were they doing before they established CIT Bank??
They were once principle investors of income property. Nothing fancy. No sponsors for JV deals. Middle market players that had real estate portfolios in the $2mil to $10mil range. Many cashed out and just lend now.
I don't know what GE and CIT Group do, but many Non Bank Financial Institutions (NBFIs) and non-retail deposit taking banks/NBFIs issue medium and long term debt to wholesale bond and commercial paper debt markets.
This is effectively the same as taking deposits, just on a wholesale basis.
I guess I always kind of assumed that GE Capital began out of a natural extension of the cash generation from the industrial GE divisions. Did a little digging and the article below basically says they rely on GE's triple A credit to get access to cheap capital.
http://online.wsj.com/news/articles/SB100014241278873237837045782461503…
check out my thread on alternative lenders. low interest rates and more opacity in the bond market means a market opportunity for non bank lenders. they have the money from private placements through people like me and my clients.
Research: non-banking sector consumer lending (Originally Posted: 06/27/2016)
Hello everyone,
researching the non-banking lending industry, putting emphasis on its development in Europe.
Currently searching for a list of such insitutions (companies) involved in consumer lending in Europe. Maybe, by any chance, some of you have already compiled such a list or can share some places where to look for.
Would really appreciate any information.
bump
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