With regard to regulations, these have limited some developers' ability to leverage to historical levels, said Michael Sanchez, managing director for RealtyMogul.com. Rahimian said the banks are now regulated to put 15% of the future value of a property into the deal, which is making it difficult for lenders to do construction loans, forcing them to work with private lenders.

In discussing the capital stack, the panelists said it depends on the situation. “We have done up to 90% leverage, and we typically do 80% to 85%, but these are for properties that are not yet stabilized—usually they are value add,” said Sanchez. Rahimian and Balce said their firms will leverage up to 75%, and Balca added, “and we are first in line” to get paid.

Some of the biggest changes lenders have seen in the past 12 months include banks, CMBS and life companies scaling back, particularly from bridge and construction loans, allowing “new capital to come into the market to fill the void, and it will continue to do so,” said Bechtel. The “implosion of the CMBS markets” has been notable, said Sanchez. “It's tougher for some loans to get paid off. Borrowers need to be aware of pending maturity dates.” Balce said rates on interest-only loans have gone down, but her firm's rates are around 7%, with the borrower paying both principal and interest. Bechtel said, “There is a lender out there for every deal,” and the other panelists agreed.

Braniger asked how Orange County compares to the rest of the country, and Bechtel said the market is “hyper-aggressive. There are so many lenders; there is someone out there no matter what the need. It's so competitive, and there's a tremendous amount of rate compression.”

The panelists agreed that Brexit hasn't made a lot of changes in the marketplace, but Rahimian said Brexit's importance is not just about one event, but is more representative of what's going on in the world. “We could see an impact if that continues. How can you not be affected by global issues?”

Bechtel said a lot of capital is trickling into the CRE industry from Europe, where investors are seeking alternative investment vehicles. Rahimian said a huge influx of money was coming in from China, but this has slowed down because “the Chinese government had to stop the bleeding.” Still, Bechtel said there is “a lot of money coming in out of that part of the world,” including from markets like Singapore.

Balce said there were a lot of cash deals coming from China, but this will lessen as more credit becomes available to foreign investors.

For an in-depth discussion of the financing options available outside of traditional lenders, be sure to attend the “Alternative Financing Universe” panel discussion at RealShare National Investment & Finance, scheduled for Oct. 5 and 6 at the Roosevelt Hotel in New York City.

COSTA MESA, CA—New lending regulations have made it difficult for traditional lenders to do certain types of loans, forcing borrowers to work with private lenders, a positive step for the industry, said panelists at RealShare Orange County here Tuesday. This development has created a wealth of opportunity for marketplace lenders, diversifying the industry and providing capital for nearly every type of loan.

Francesca Braniger, VP and senior relationship manager for Sunwest Bank, as well as this year's president of CREW-Orange County, asked the panelists what they are seeing investment-wise on the debt and equity side. Paul Rahimian, CEO of Parkview Financial, said he is seeing low cap rates in Orange County and healthy deal flow on the lender side. Gary Bechtel, president of Money360, said cap rates will change, but slowly; for the foreseeable future, they will remain “crazy low.”

Braniger asked if small business owners are fearful of another recession or if they are still investing in real estate, and Stephanie Balce, account executive for Velocity Mortgage Capital, said the small-business owner is able to qualify with her firm for long-term financing.

When asked how far down cap rates will go, Rahimian said that 25% of the world has negative interest rates, so there's still more room for cap rates to compress here. Balce agreed, saying her firm leverages debt against real estate weight. Bechtel added that Orange County is one of the hot markets, but others are starting to turn a corner and some have even peaked. Brexit and other global events have slowed capital flow into the secondary and tertiary markets, he said.

With regard to regulations, these have limited some developers' ability to leverage to historical levels, said Michael Sanchez, managing director for RealtyMogul.com. Rahimian said the banks are now regulated to put 15% of the future value of a property into the deal, which is making it difficult for lenders to do construction loans, forcing them to work with private lenders.

In discussing the capital stack, the panelists said it depends on the situation. “We have done up to 90% leverage, and we typically do 80% to 85%, but these are for properties that are not yet stabilized—usually they are value add,” said Sanchez. Rahimian and Balce said their firms will leverage up to 75%, and Balca added, “and we are first in line” to get paid.

Some of the biggest changes lenders have seen in the past 12 months include banks, CMBS and life companies scaling back, particularly from bridge and construction loans, allowing “new capital to come into the market to fill the void, and it will continue to do so,” said Bechtel. The “implosion of the CMBS markets” has been notable, said Sanchez. “It's tougher for some loans to get paid off. Borrowers need to be aware of pending maturity dates.” Balce said rates on interest-only loans have gone down, but her firm's rates are around 7%, with the borrower paying both principal and interest. Bechtel said, “There is a lender out there for every deal,” and the other panelists agreed.

Braniger asked how Orange County compares to the rest of the country, and Bechtel said the market is “hyper-aggressive. There are so many lenders; there is someone out there no matter what the need. It's so competitive, and there's a tremendous amount of rate compression.”

The panelists agreed that Brexit hasn't made a lot of changes in the marketplace, but Rahimian said Brexit's importance is not just about one event, but is more representative of what's going on in the world. “We could see an impact if that continues. How can you not be affected by global issues?”

Bechtel said a lot of capital is trickling into the CRE industry from Europe, where investors are seeking alternative investment vehicles. Rahimian said a huge influx of money was coming in from China, but this has slowed down because “the Chinese government had to stop the bleeding.” Still, Bechtel said there is “a lot of money coming in out of that part of the world,” including from markets like Singapore.

Balce said there were a lot of cash deals coming from China, but this will lessen as more credit becomes available to foreign investors.

For an in-depth discussion of the financing options available outside of traditional lenders, be sure to attend the “Alternative Financing Universe” panel discussion at RealShare National Investment & Finance, scheduled for Oct. 5 and 6 at the Roosevelt Hotel in New York City.