We recently held our annual Equity & Debt Summit where we sat down with over30 of the leading sources of Real Estate capital to discuss their platforms and outlook for 2021. Here are a few of our key takeaways:
Bridge money is super-heated!
There is currently an abundance of demand for floating-rate money with flexible pre-payment terms, typically utilized for the 3 R’s of CRE: Renovate, Redevelop and Reposition. To support that demand, there are now over 165 bridge players in the space, compared to only 25 conduit lenders.
Hospitality ain’t dead
Whereas no demand for hospitality properties existed throughout much of 2020,early 2021 has shown an appetite for limited product types, namely Leisure& Extended Stay properties. Numerous investors cited Marriott’s Residence Inn as a leading flag worthy of investment.
Capital is flooding into the High-Yield space
Despite a dramatic upturn from its floor of 90 bps, the 10-year Treasury remains near historical lows. Combined with Corporate junk bonds recently hitting their historical low below 4%, there’s been a frantic search for yield. Demand for high-yield Real Estate has thus surged, where rates of 5% and up look comparatively attractive.
Interest-only has become the norm
Institutional lenders, long lovers of amortizing debt, are now overwhelmingly offering interest-only terms to remain competitive. Some 63% of institutional loans by volume now contain some period of interest-only. In CMBS, deals with65% leverage or less are routinely offered 10-year interest-only money for the term.
COVID-related deferrals are flat to declining
Numerous insurance companies indicated their COVID-related requests were beginning to come down from their recent peak, having worked through most of their list of deferrals. While there’s evidence of some downward pressure on Office, Retail, and Hospitality property prices due to COVID, we don’t see blood in the street.
Stay tuned for continued updates as we survey the market and as always, continue to keep John B. Levy & Company, Inc. in mind for any CRE equity or debt needs. Contact John Levy at jlevy@jblevyco.com or 804-500-9025.
