I recently rejoined my bridge lending firm just this week. Upon returning, I found out several of our loan buyers have dramatically changed their credit box and many of our loans no longer fit. I wonder if capital markets are still frozen across the industry or if this is just a “me problem”? When will they free up? Thoughts?
I can see that Non-Agency MRIETS are still screwed and the Credit Spread is super wide. Was the 2008 recession this bad? The only loan buyers I have been running into today are bottom feeders. What do you guys see?
Thanks
- Cries From a First-Year Analyst.
I heard through a friend that a couple of debt funds are giving cash right now, but they're not making serious deals. They're quoting at 800 over LIBOR and 8% rates for standard loans. They're looking for someone dumb enough to take it. Just throwing garbage at the wall and hoping it sticks.
We still have a deal pipeline.Lot of deals we can still hit. Just no take outs for our loans anymore.
Trying to avoid slinging garbage. The VP is "ethical" about that.
I can give specific insight to the broader loan market, and then real estate if you really need to I can do a deal scan on loan connector and check. but incremental term loans are getting done where originally the B/B2 company was L+400 ish, and was getting done at L+1,200 to L+1,300, 97.0 ish. this was the norm maybe 1 month ago. high yield bond market has improved since, so ppl are doing those more now
I don't think that would be super helpful here.
Simple put we still have a pipeline of deals we would like to get done. However, our loan buyers are no longer get leverage to hit the returns they need. In other words, we need some capital influx for these loans.
I feel I am looking for the holy grail right now lol
L+800 with LTC of 60-65% is where we are willing to participate currently..
We have been able to get some stuff done higher than that...
Who the fuck is paying that?
We had a couple deals where they were hard on escrow pre corona and had to get the deal closed. The rate was egregious.
A lot of experienced sponsor's who don't want to put down a PG. Most birdge lenders, I know MD's at the top, and my companny jsut started its own, lend in 8%-12%...not quite the hard money space but the quick close to 75% LTV/LTC range. For some acquisitions, it is the bidge to LP or co-gp capital. Institutional developers were at ~5% for bank money for ground up with Mack Credit at 6-8% in the 4th place bidding spot. 8-9% for non floating rate is not terrible.
We are open for business but prioritizing existing clients particularly our top sponsors with whom we have deposits and cross sell opportunities.
We’re about L+450 right with a full year’s interest reserve escrowed at closing at 75% leverage
What level of proceeds are you willing to do?
full recourse most likely....
Why are you guys charging so little? What are the sizes of your loans?
I have only heard something like that from PCCP. But this was an io on a 40mm office building.
Charging 1 pt in and 1 pt exit fee. Depending on the deal, there may be an artificial LIBOR floor needed to push up overall coupon.
A lot of folks here mentioned 'loan buyers' so i am guessing you guys just scrape a fee/keep an IO strip and dont truly 'balance sheet' the loan?
It depends on the deal and ltv for us. We have gotten deals at 14% intrest and deals at only 10% LTV.
Usually loans that are balance, higher than 10 million have to stay on the balance sheet. It's next to impossible to find someone who wants to take a b piece on that.
Understood, so you are syndicating part of it (sell the senior/junior and retain the residual), but not the entire stack. Makes sense and not uncommon. Especially in these times, id imagine lenders would value structural leverage over financial leverage.
Frozen as fuck. Refi market is likely dead. CMBS is starting to pick up in a little bit.. I can't see bridge opening for a while (why would it?). Bridge loans are mostly focused on a biz plan (leasing, Capex plan/reno.. what biz plan is being accomplished today?). Most bridge players are conserving cash and focusing their book/asset management. Besides that spreads have gapped out... so borrowers must accept wide pricing (with lower leverage) and likely massive upfront reserves. For what its worth, its my understanding that some BB CMBS shops and even FNMA have required 6months or full year of upfront DS reserves... on wide pricing.
In total, open lenders may just be the local/community banks for time being.
What industry is this for? Or asset class?
Because the multifamily market is back open for business, almost entirely. Even CMBS showing signs of life. Agency debt is pushing back below the 3% threshold and most lenders are pricing in the 3.50% area. LifeCos maybe 75 bps higher. As long as you aren't asking community banks to take on more than ~75-100mm of debt they're open for business (don't want larger loans on their balance sheet). Or that's what we're being quoted
I heard agency was open with massive reserves.. this maybe stale... I'm not close to this mkt... CMBS is showing signs (and should open further pretty soon, multiple deals going to mkt)... but these are going to more straight down the middle (even for cmbs). Saw couple BB cmbs deals close in mid/late April... multis with full 6 months or one year of DS reserves (granted they upsized a bit to cover some of the reserve, 72% LTV, ~4.65%)
On bridge, I'm talking debt fund/etc... not local/community banks or shit hard money. Obviously retail/hospitality are ways away... but even balance/sheet bridge for multi are much more opportunistic/selective (emphasis major markets) and at L+400-800+ vs. 300s or below last winter. Guys are looking to get paid to execute today.
I'm in the space and the guys I see refi a loan out or maybe bid against us.... frankly never heard of them. You're not seeing the usual suspects.
This is what I'm seeing in all mreits, debt fund, etc... the bridge players ... even some major commercial banks. The community banks are really always open... but kind of a different animal
Yes, agency debt is available.
CMBS bond issuances are excluding hotel and retail properties. CMBS buyers also want to ensure that they are not buying loans that are in default, so the originators are being forced to hold the loans on their balance sheets for 1-2 months to prove that payments are being made in accordance with the loan documents. CMBS may be showing some signs of life, but it'll stay in intensive care for a while longer it seems.
This is way too much of a blanket statement. We’re back up and running on bridge loans. There’s some good opportunity out there for solid collateral that lost their pre-covid financing and other one-off stories if you can find it.
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