Retail Lenders’ Appetite Is For Budget-Friendly Dining
Spending at restaurants and bars rose 8.5 percent over the past year, the largest gain among retail categories.
CMBS retail lenders are exhibiting a preference for assets in Southwest and West Coast metros and life companies are looking to the Northeast, according to a new report from Marcus & Millichap.
For single-tenant borrowers, local and regional banks are accounting for 60 percent of all lending in the subsector through June this year.
Providing loans at an average LTV of 65 percent, these lenders also represent the main supplier of capital for tertiary-located, multi-tenant deals.
Lenders’ appetite for retail, interestingly enough, is with budget-friendly dining trends, giving boost to net-leased assets.
Consider that spending at restaurants and bars rose 8.5 percent over the past year, ending in August, the largest gain among retail categories.
Through September, fast-food properties were selling 1.4 percent above their asking price on average, according to the report.
“Net-leased assets and well-located shopping centers with national anchors and long-term leases in place remain extremely approachable properties for lenders, some of which are engaging in the marketplace with greater regularity,” according to the report.
Life insurance companies and national banks collectively accounted for nearly half of all retail lending in the first half of 2023, compared to a 38 percent share in 2022.
The bulk of their attention is on anchored and unanchored shopping centers, providing loans averaging from $11 million to over $15 million, Marcus & Millichap writes.
Moving forward, tight vacancy, a restrained development pipeline and record asking rents should support a more diverse lending platform, according to the report.
Marcus & Millichap add that distress could occur when higher-leveraged loans obtained over the past five years come due during a period of higher capital costs and lower LTVs.
Meanwhile, Chick fil A, Starbucks, Jack in the Box, Chipotle, and Burger King, led the list of year-over-year sales growth leaders through August. This makes assets with drive-throughs even more sought after.