New Lending Opportunities Emerge as Conditions Stabilize

LAGUNA BEACH, CA—GlobeSt.com was in attendance at the 20th Annual Winter Forum on Real Estate Opportunity & Private Fund Investing, where more than 1200 attendees gathered on Wednesday morning in Laguna Beach, CA. The morning’s “Macroeconomic Factors” session brought attention to key topics such as interest rates, inflation, and bank activity.

Panelists observed that private commercial real estate is currently approaching fair value as bond yields decline. Despite a deceleration in real estate fundamentals, they remain relatively robust. Panelists emphasized the positive standing compared to previous periods, highlighting the interest rate story and relatively stable bond yield changes. They noted that while debt costs have spiked, they have since cooled.

Addressing the banking sector, Spencer Schlee, Managing Director of Canyon Partners Real Estate, pointed out that troubled assets on the balance sheets of banks have emerged as a significant concern. “This situation presents an opportunity for alternative lenders to step in,” he said, albeit at a higher cost of capital. The presence of these alternative creditors is putting permanent pressure on the bid-ask spread in the market.

Looking ahead to 2024, he noted that the banking sector is expected to grapple with reconciling these assets on their balance sheets, leading to increased pressure to de-risk portfolios. Potential strategies include loan consolidation, though this may pose challenges in managing public perception, he noted.

Charlie Woo, President of Bancorp Funding, explained that there is an “abundance of opportunities.” Despite public perception challenges faced by regional banks, which are heavily invested (70%) in commercial real estate loans, Woo remains optimistic about the sector’s potential for growth.