1. No lender is an island
Alternative lenders continue to eat away at loans that were once the domain of banks and insurance companies, with debt funds and other financing companies showcasing their rising lending activity in the call for nominations.
But this activity is not in a vacuum, with nominations highlighting partnerships between alternative lenders and banks or simply groups of alternative lenders financing projects.
The market has become increasingly adept at efficiently carving up and parceling out risk, a trend we expect to see continuing as the recovery from the covid-19 pandemic goes ahead. This is why the alternative lenders category was the most hotly contested, both in terms of the nominations that came in as well as in the voting.
2. Affordable options
Financing affordable housing options was a major theme among nominations, with alternative and traditional lenders of all sizes highlighting their activity in this part of the market. And this focus paid off, particularly for JPMorgan Chase, which took home top honors for Bank Lender of the Year based on the wide breadth of business it does in this segment. This is expected to remain a major theme, particularly as the supply-demand fundamentals of the US housing market remain out of balance and borrowers and lenders alike think of new uses for obsolete buildings.
3. Lifecycle of a deal
A key theme among the nominations was a lender’s ability to offer borrowers a wide slate of options, from construction financing to a traditional permanent loan. A case in point is Ready Capital, the winner of the Mid-Market Lender of the Year, and its move to build origination infrastructure that allowed it to expand its activity across multiple types of loans.
The expectation is that more lenders will look to increase their touchpoints with clients, either through partnerships or acquisitions.
4. Good advice
As the market enters uncertain territory, the value of good advisers – be it servicers, brokers, lawyers, or other parties – is expected to become increasingly critical. Market-, sector- and loan-specific data could be a distinguishing factor in many deals, with advisers working to help their clients pull the trigger – or pull back on transactions. These relationships are seen growing in importance as the commercial real estate debt markets enter the post-covid, rising rate world.
Loan structures are expected to become more complicated, with more mezzanine debt and preferred equity to bridge the gap between what lenders will provide and what borrowers want in terms of proceeds. And there is one more factor: working to navigate generational challenges in the broader financial markets that include rising inflation, higher interest rates, and unanticipated geopolitical challenges.
5. Looking ahead
A final takeaway is that with its first complete awards cycle in the books, Real Estate Capital USA is looking ahead to expand its categories in 2022 to reflect more sector-, market- and loan-specific achievements.
Expectations are the coming year will be more volatile than the past two, and lenders and their advisers will be forced to navigate tricky waters as inflation and interest rates both rise and potentially slow down transaction activity.