Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
Issue link: http://cire.epubxp.com/i/649656
March | April | 2016 Commercial Investment Real Estate Mar Mar Mar Mar Mar Mar Mar Mar Ma M ar Mar ar a Mar Mar Mar Mar Mar Mar Mar Mar ar Mar Mar Mar Mar Mar ar Mar Mar Mar Mar a Mar r Mar Mar ar Ma Mar ar Mar Mar Mar Mar Mar a Ma M ar Mar Ma Mar Mar Mar Mar Ma a Mar Mar a M ar Ma Ma Mar Mar r Mar ar Ma r a r a r ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch ch h ch ch ch h h ch ch ch ch ch h h ch ch h ch ch h ch ch h ch ch c | A | A | A A | A | A A | A | A | A A | A | A | A | A | A | A A | A A | A | A | A A | | A | A | A | A | A | | pr pri pri pri pri pri pri pri pri pri pr pr pri pr pri pr pr pri pri pri pri pri pr pr pr pri pri pri pri pr pri pr pri pri pri pri r pr p l | l | l | l | l | l | l l | l l | l | l | l | l | | l | l | l | l | | l | l | l | l | l | l | l | | l | | l | l | l | l l | l 20 20 20 20 20 20 20 20 20 20 20 20 0 20 20 2 0 20 20 20 20 20 20 20 20 20 20 20 20 20 0 20 20 20 20 20 20 20 6 16 16 16 16 16 16 16 16 16 16 16 16 6 16 16 16 16 16 16 6 16 16 16 16 6 1 6 16 6 16 6 16 16 6 16 6 Com C o Co Co Co Co om Com Com Com Com Com om Com o Com Com Com Com Com Co Co om Co om Com Com Com Com Co om Com Com om Co Co om Com om om Com Co om m C om m Com Com o Co o Co m Co Co om o m Co o Com Com Com Com C m Com m C o m mer mer mer me me me mer mer me me mer me me er er er er er er er er mer er er er me me er er er mer mer mer mer mer er er er mer m er er e mer mer er mer mer mer me m e r mer er me e mer r mer r er me mer er r m e mer r m e mer r m r me er e m e r e r cia cia cia cia ia ia a cia a cia cia cia cia a ia cia cia cia cia cia cia cia cia cia cia ci cia cia a cia a c a cia c a cia c a l I l I l I l I l I I I l l I l l I l I l I I l I I l I I l l I I l I nve nve nv nve nve nv v nve nve nv nv nv nv nv nve nv v nv nv v nv nv nve nv nve nv nv nv nv nv n v n ve n e stm m stm m en ent ent ent ent ent ent ent ent ent ent ent t ent nt t en ent ent ent t ent ent en ent t ent nt t ent en ent nt ent nt n en nt t en en en nt n t e n t en en n en en n en en en n en en en n ent nt n t en en n en e n en n en t en en e n e n t n t n t n t Re Re Re Re Re Re Re Re e Re Re e Re Re e Re Re Re Re e Re Re Re Re e Re Re Re Re e Re e Re Re e R e R e R e R e Re R e R al al al al al al al al a l al al al l al al l al al al a l al a l a l Est Est Est E s E t t E t st Es Est Est E st Est Es E t E t Est Est Est s t st t st Es Est Est Es Es s t Est Est Est Est Es st t Est t Est Est E s t Est Est E s t Est Es Es Est st s t Est Es E st t Est Es st st st t st t st E st t E s t E st t st st t s t s t s t s t s E ate ate ate ate ate ate ate ate ate ate ate ate ate ate e ate ate ate e t ate e ate ate ate ate e ate t at te te ate ate ate at at te ate t ate ate at at t ate te te ate at ate e te a e at a e ate ate ate a e a t e ate a t e t e ate e t e a t e ate e ate a e a e a e a t e a the past few years as an option to address the shortfall between borrower demand and the supply of lendable bank funds. In considering the key lending segments, such as personal and small business, lever- aged lending, commercial real estate, mort- gage, and student loans, Goldman Sachs estimates the aggregate of alternative loans outstanding to be $4 trillion, compared with $8 trillion of bank loans. From 2009 to 2014, peer-to-peer loan issuance grew sub- stantially, from $26 million to $1.7 billion. Loans made between individuals is nothing new, but technology-based platforms such as Lending Club and Prosper Marketplace have made these types of transactions easier than ever, which has enabled the exponential growth of this form of lending. Within real estate lending, nonbanks' share of mortgage originations jumped to a record 42 percent in 2014, up from 10 percent in 2009. T e advancing wave of commercial mortgage-backed securities maturities cre- ates another opportunity for nonbank lend- ers. Many of these CMBS loans may not be eligible for ref nancing from banks or CMBS due to cash f ow shortfalls. Private lenders may be a viable and formidable option to f ll this gap. Private Lender Advantages Since they are generally smaller, nimbler, and have less overhead, private lenders can cherry-pick loans without being subject to blanket regulations that render entire asset classes unattractive. T is may contribute to safer loan portfolios overall. A massive opportunity has emerged for private bridge Post-Bank Lending Are borrowers making a shift to alternative fi nancing sources? 14 Before 2008, lending decisions were generally driven by the eco- nomics of loan volume. The priority of making money through loan origination was hard-coded into the commercial banking culture, as compensation was based on loan volume not loan performance. Not surprisingly, the quality of loans in banks' portfolios deteriorated as risks mounted, setting the stage for the 2008 fi nancial crisis. by Brian Good In the wake of the 2008 f nancial crisis, the federal government enacted regula- tions designed to prevent incentives based on origination volume. T e result was a tightening of credit and capital markets, and a larger pool of borrowers was unable to access loans. As the economy recovered, the demand for debt f nancing grew. However, due to aforementioned regulations and bail-out conditions, banks were either unable or unwilling to make many of the loans they were making before 2008, even on low-risk properties. Increasingly, borrowers looking for loans couldn't f nd them through tradi- tional channels. Nonbank Resources Alternative lending has always existed in one form or another alongside the tradi- tional banking system. However, it's taken on a larger and more intriguing role over FINAN CIN G FO CUS by Brian Good megainarmy/Thinkstock