{"id":1004693258,"date":"2023-12-06T07:48:04","date_gmt":"2023-12-06T15:48:04","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004693258"},"modified":"2023-12-07T08:58:24","modified_gmt":"2023-12-07T16:58:24","slug":"on-the-news-why-mezzanine-capital-has-gone-missing","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/on-the-news-why-mezzanine-capital-has-gone-missing\/","title":{"rendered":"On the News: Why Mezzanine Capital Is Growing Scarce"},"content":{"rendered":"
\"\"<\/a>

Therese Fitzgerald<\/p><\/div>\n

If ever there was a need for mezzanine lenders, it\u2019s now. But it\u2019s harder to find one as private lenders grow more cautious, according to a panel of investors at last week\u2019s NYU Schack<\/strong> Capital Markets Conference in New York City.<\/p>\n

\u201cThe senior needs to come back, to feel comfortable, for the mezzanine to come back,\u201d said Tim Johnson, Global head of BREDS<\/strong>, Blackstone<\/strong>.<\/p>\n

Mezzanine financing grew in importance post-GFC after banks tightened their underwriting on larger lenders, leaving borrowers with gaps in their capital stacks to fill. Just how much mezzanine lending was done during the upcycle is hard to gauge since mezzanine loans do not appear in public records, but mezzanine lending helped boost the large number of loans originated during the pre-2022 low-rate period.<\/p>\n

And these lenders came out in force last year, raising heaps of capital to stem the shortfalls owners would have when they try to recapitalize or refinance now that rates are higher and fundamentals are weaker, particularly for office space. And, since mezzanine capital is more expensive than senior debt and promises a higher return for investors, the opportunities seemed endless.<\/p>\n

\u201cOnly 25 percent of the current market you could refinance as-is,\u201d said Miriam Wheeler, partner,\u00a0 managing director & head of the Global Real Estate Financing Group at Goldman Sachs & Co.<\/strong><\/p>\n

But, lately, there\u2019s been pullback by mezzanine lenders and some consolidation among them as property income and valuations have further eroded and, as Johnson mentioned, senior lenders have grown more skittish following this year’s regional bank collapses and as more loans under-perform. \u201cA lot of the banks are just frozen,\u201d said Andrea Balkan, managing partner and head of Real Estate funds, Brookfield Asset Management<\/strong>.<\/p>\n

Trouble in the capital stack<\/h2>\n

But it\u2019s not just senior lenders who are dealing with defaults. Last month, the Wall Street Journal<\/a> reported that 62 foreclosure notices were issued by mezzanine and other high risk lenders through October. It was the most in 15 years. That is sure to erode confidence even further among the mezzanine crowd.<\/p>\n

Brookfield, Balkan said, is still committed to its core mezzanine lending business but, as overall liquidity has decreased, it has broadened its lens to include rescue capital, recapitalizations, construction lending and CMBS. Today, Balkan\u2019s group may originate a whole loan and then originate a mezzanine loan. Regardless of the opportunity, however, quality is paramount.<\/p>\n

\u201cI think mezzanine lenders are ready to step up for an appropriate return on new buildings,\u201d she said, noting the increasing gulf between A\/B office buildings. \u201cWe\u2019re not going to throw good money after bad,\u201d she added.<\/p>\n

Speaking of office, that\u2019s where liquidity is most constrained. The property type is experiencing the same re-ordering that occurred in retail, observed Jesse Hom, managing director & global head of Real Estate Credit and Capital Markets, GIC<\/strong>.<\/p>\n

\u201cThere is a very clear stratification of asset quality (in retail), and capital support will depend on where you fall,\u201d said Hom. \u201cWe see office falling into those tiers and a similar shakeout.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Private lenders are not finding this vehicle as appealing as they once did.<\/p>\n","protected":false},"author":756,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21684],"tags":[],"class_list":["post-1004693258","post","type-post","status-publish","format-standard","hentry","category-viewpoint"],"acf":[],"yoast_head":"\nOn the News: Why Mezzanine Capital Is Growing Scarce - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/on-the-news-why-mezzanine-capital-has-gone-missing\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"On the News: Why Mezzanine Capital Is Growing Scarce\" \/>\n<meta property=\"og:description\" content=\"Private lenders are not finding this vehicle as appealing as they once did.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/on-the-news-why-mezzanine-capital-has-gone-missing\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2023-12-06T15:48:04+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-12-07T16:58:24+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2023\/07\/therese_fitzgerald-3.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"800\" \/>\n\t<meta property=\"og:image:height\" content=\"620\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Therese Fitzgerald\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/on-the-news-why-mezzanine-capital-has-gone-missing\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/on-the-news-why-mezzanine-capital-has-gone-missing\/\",\"name\":\"On the News: Why Mezzanine Capital Is Growing Scarce - 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