News April 13, 2023

Real estate debt funds step into the banking void

PERE reported that alternative lenders are seeing more opportunites as banks continue to retrench. “Banks really lend on a ratio of deposits, and that is going to curtail their ability to lend, ” Josh Zegen, managing principal and co-founder of New York-based manager Madison Realty Capital, told PERE. “That’s going to lead to loan sales, banks shrinking their balance sheets, lender finance opportunities for us to finance alternative lenders and just more availability of opportunities for private credit.” Zegen said that Madison Realty would not rule out investing in office but the “bar is very, very high.” Some pockets of the US, such as South Florida, still see strong demand for office because of the migration of new companies and residents to the area. However, most debt fund managers see good financing opportunities in sought-after sectors like multifamily, industrial and some niche property types, although they typically face stiffer competition on such deals, Zegen said. Additionally, there will be an opportunity to not only buy distressed loans but to lend to distressed loan sellers as well, according to Zegen. “It’s generally a senior secured position because I’m financing another lender, ” he said. “There are banks that are in the market today doing that, but as the balance sheet of banks shrink, and their ability to lend shrinks, so too will the ability of the banks to do that business, and we’ll pick up the void.”

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