Real Estate Debt- Are Capital Markets Still Frozen?

Question

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.

apricots · Accepted Answer

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...

apricots · Answer

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.

C.R.E. Shervin · Answer

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.

Ozymandia · Answer

"apricots"
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.

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