Equity Funding Slowdown and CRE Uncertainty Push Alternative Lenders to the Sidelines
The last time banks took a step back from property lending, alternative lenders filled some of the gaps, taking advantage of the opportunity to make good returns. However, a slowdown in equity fundraising and increased risks in commercial real estate financing has prompted alternative lenders to similarly move to the sidelines. In the second quarter of 2023, real estate debt funds focused on North America raised $930 million, compared to the $10 billion raised in the second quarter of last year; and institutional investors that normally write big checks for debt funds are facing the need to rebalance there allocations to real estate amid a drop in bond and equity prices, or they think better returns can be made elsewhere with less risk. Not including loans sitting on banks’ books, securitized debt valued at $163 billion comes due this year, making it a very bad time for a tightening of bank and nonbank lending; and representing the biggest annual amount in the U.S. over the next decade, the figure significantly exceeds what alternative lenders can offer.