Latest Finance Trends

There will be an increase in hotel transaction volume during the second half of 2024 and into 2025. With treasuries dipping well below 4%, all-in rates are back in the mid- to high 6% range for hotels. As long as treasuries continue to stabilize — lowering the overall cost of debt — more deals will pencil. There could be even more restrictions on the bank side due to increased regulations already set to roll out. Count on that void to be partially filled by debt fund, private money and CMBS lenders. Keep an eye out for an increase in alternative hotel lending sources in the next year, many of which are very competitive and flexible. This is due to the transition away from office loans and certain types of retail deals into hotel lending as a lot of banks were light on hotel exposure and are rethinking allocations. More

Count on a continued slow improvement in the multifamily bridge market through 2025. This is based on higher investment sales activity and what appears to be increased engagement by sellers and buyers. Loan spreads for multifamily bridge will remain flat to slightly tighter as market conditions continue to improve. There will be plenty of demand for bridge loans going forward. Watch for more volume and spread compression throughout the rest of the year. Look for the debt funds to be active moving forward, as mid-size transactions pick up in the next 12 months. More

Look for construction lending to increase during the fourth quarter as many funds get new allocations. Construction lending will be strong going forward as there is a need for housing and lenders feel safe with floating-rate debt and not constrained by fixed-rate deals where they can be caught on the wrong side of interest rates. The banks are holding back because of their limited liquidity, which leaves a large vacuum for the private lenders and debt funds to step in. Banks are seeking deals with experienced sponsors. They will prefer low leverage and the location must be strong with good density. More

The National Retail Federation (NRF) has unveiled its 2024 list of the Top 100 Retailers. The annual ranking, compiled by global marketing data firm Kantar, is based on domestic sales and offers a snapshot of the retail industry’s leading companies. “This year’s list of the Top 100 Retailers largely reflects a post-pandemic return to normal,” More

Keep an eye out for more lenders considering senior housing deals once again. The sector has already seen more lending activity than this time last year. This is a function of banks re-entering the market, along with other factors such as an uptick in acquisitions, as fundamentals across the sector continue to improve. Banks are also no longer providing extensions, thereby motivating borrowers to sell. The increase in transactions will help with re-establishing values. Margins in the industry are also beginning to recover, such as expenses and payroll costs stabilizing. More

CMBS lending has vastly improved over this time last year and will continue to steadily increase throughout the rest of 2024. With around $45B already originated, total originations could be close to $100B total this year. This means the sector is returning to more normal levels. The overall outlook for CMBS is very strong, especially as compared to the regional banks and life company lenders. CMBS is able to offer higher proceeds as they size the loans off an interest-only payment, versus amortizing. The biggest advantage they offer is the ability to buy down the rate. Borrowers can buy down the rate by up to 6% points. More

There will be plenty of available capital for small retail deals, even from the local and regional banks. Count on lender optimism in the retail space, as fundamentals are strong, partially driven by the high costs to build new product. Lenders like that the sector has not been overbuilt and much of the obsolete product More

Count on bank lending to remain conservative and cautious throughout the rest of 2024. Bank lenders are awaiting further guidance from the Federal Reserve regarding rate cuts and the upcoming election, which should provide more clarity on the direction of the market heading into 2025. The cost of capital will continue to put a damper on lending activity. Some banks with dry powder are seeing the disruption as an opportunity to fund high-quality loans with the best borrowers at higher rates. More

There will be plenty of capital market interest in self storage this year, as this is considered a safer asset class. Self storage has continued to be a top-performing property, which makes lenders and investors confident. There has been some overbuilding in certain markets, but new construction is expected to slow in those areas as lenders steer clear of markets that are oversaturated. Underwriting will be more conservative and count on lenders to take a closer look at supply. Borrowers will see lower leverage and higher spreads. More

Look for most of the life companies to be active during the second half of the year as they strive to meet allocations. Total 2024 life company originations will be greater than 2023, although not up to the highs seen in 2021/2022. Life company spreads have come in since the beginning of the year. Debt service coverage ratios will remain tight in the current high-interest-rate environment. Leverage could go up slightly for the strongest deals. Look for life companies to be more open to retail this year, as their portfolios are heavily weighted in multifamily and industrial. They will be aggressive on refinances with low leverage, while cautious with cash-out refinances. More

Equity investing will stay limited until the money-center banks return to the sector and more transactions hit the market. Despite there being an enormous amount of equity capital on the sidelines, JV equity is much more selective. Anticipate a greater interest in pref equity versus traditional JV equity from institutional investors going forward. In times of uncertainty, many investors will prefer pref equity over JV, especially as return demands rise. Investors like the risk-adjusted returns with pref equity behind stabilized deals. Many equity investors are sitting on money, just waiting to see what the economy and rates will look like during the second half of the year. More

Multifamily has seen a tough start to the year with the lack of transactions and capital remaining on the sidelines. Conditions will likely ease in late Q3 or Q4 once the Fed makes a move to lower rates. Once that happens, capital will open, and transactions will pick up. There has been a dip in rents across the board and loan underwriting has been conservative. Lenders are having to be more creative to get deals done and borrowers will need to bring in mezz or pref equity to fill capital stacks. More