{"id":1004752675,"date":"2025-04-02T15:22:50","date_gmt":"2025-04-02T23:22:50","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004752675"},"modified":"2025-04-03T07:04:52","modified_gmt":"2025-04-03T15:04:52","slug":"cre-lenders-banking-on-deal-momentum","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/cre-lenders-banking-on-deal-momentum\/","title":{"rendered":"CRE Lenders Banking on Deal Momentum"},"content":{"rendered":"\n
\"A<\/a>
Image by AlonzoDesign\/iStockphoto.com<\/em><\/figcaption><\/figure>\n\n\n\n

If the sentiment of commercial real estate lenders is any indication, 2025 should be a year of improving investment sales and refinancing opportunities. Banks, insurance companies, CMBS underwriters and a cadre of private credit funds are all competing (and sometimes partnering) to take advantage of a transaction market that began to show life in the second half of 2024.<\/p>\n\n\n\n

\u201cThe level of interest among lenders in this environment is the strongest we\u2019ve seen in years,\u201d said Trey Morsbach, an executive managing director & debt platform leader for JLL. \u201cIt\u2019s not always the case in cycles, but in this particular circumstance, the debt markets are incredibly accommodative and could be a catalyst for transaction flows.\u201d<\/p>\n\n\n\n

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READ THE MAGAZINE<\/strong><\/a><\/div>\n<\/div>\n\n\n\n
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A recent debt fund closing by Heitman<\/a> illustrates the appetite for credit investments. The firm secured more than $800 million for the vehicle\u2014an oversubscription of $200 million\u2014which will finance traditional and alternative properties. Similarly, SL Green Realty has gathered $500 million in commitments for a $1 billion opportunistic debt fund that will buy nonperforming loans and provide struggling owners with financing to fund leasing campaigns and capital improvements, among other strategies.<\/p>\n\n\n\n

\"Large<\/a>
In February, JLL Capital Markets announced it had arranged a $1.1 billion refinancing for 3 Bryant Park, a 1.2 million square foot office tower in Midtown Manhattan with a large Salesforce presence. Image courtesy of JLL<\/em><\/figcaption><\/figure>\n\n\n\n

Ultimately, the growing number of bullish lenders could increase competition, translating into more aggressive pricing and better terms for borrowers, suggested Daniel Price, principal & chief investment officer at MLG Capital, a private real estate investor that has lately focused on industrial, flex, retail and multifamily properties. MLG recently launched its seventh equity fund, which is seeking to raise $400 million.<\/p>\n\n\n\n

One example of more aggressive pricing is being borne in the CMBS market. Spreads on AAA bonds tightened to 92 basis points over the U.S. 10-Year Treasury in the fourth quarter last year versus 148 basis points a year earlier, according to Trepp. <\/p>\n\n\n\n

\u201cThere is no shortage of debt out there,\u201d noted Price. \u201cEven with perceived challenges in some real estate sectors, the credit side has raised a ton of capital.\u201d <\/p>\n\n\n\n

Accelerating activity<\/h2>\n\n\n\n

Arguably, the biggest change in the market has been the return of banks, which after several quarters of uncertainty, are in a better position to make loans amid an increase in deposits<\/a> and commercial property mortgage payoffs, according to James Millon, president of U.S. debt & structure finance with CBRE. <\/p>\n\n\n\n

Meanwhile, rising annuity sales are providing insurance companies with additional cash. The companies are lending some of those funds directly to borrowers and are funneling some to property credit funds for indirect lending, added Michael Lavipour, head of lending for investment management firm Affinius Capital. <\/p>\n\n\n\n

Together, banks and life insurance companies provided nearly three-quarters of all commercial property loans in the fourth quarter of 2024<\/a>, a year-over-year increase of about 8 percentage points, according to CBRE. The brokerage also reported that buyers and sellers of office, retail and industrial assets executed sales totaling $67.1 billion that quarter, a year-over-year increase of 24 percent. <\/p>\n\n\n\n

The increase in deals occurred on the heels of an interest rate environment that momentarily improved in the second half of 2024 as well as capitulation to the idea that interest rates weren\u2019t going to drastically improve, observers said. <\/p>\n\n\n\n

At the same time, loans and extensions are coming to term or entering an adjustable-rate period, requiring sellers to make decisions, shared Dillon Freeman, a senior commercial loan officer at Fidelity Bancorp Funding.<\/p>\n\n\n\n

\u201cAcquisition folks at family offices and other investors we work with have been pounding the pavement and making offers on tons of properties with no traction,\u201d commented Freeman. \u201cBut recently, several of them have told me that they\u2019re under contract for their first deal in two years. Sellers realize that they\u2019re not going to get some sort of amazing interest rate.\u201d<\/p>\n\n\n\n

\"Low-rise<\/a>
Late last year, private real estate investment manager MLG Capital acquired the Golden Triangle portfolio, a blend of industrial and office space across seven properties in Minneapolis. Image courtesy of MLG Capital<\/em><\/figcaption><\/figure>\n\n\n\n

Green shoots in office<\/h2>\n\n\n\n

The industrial and office sectors experienced the biggest nonresidential investment activity in the fourth quarter, up 27.8 percent and 35.3 percent, respectively, according to CBRE data. The uptick in office coincided with a rebound in CMBS issuances, which exceeded $100 billion in 2024, nearly triple the securitizations in 2023, Trepp reported. <\/p>\n\n\n\n

The momentum carried over into this year. CMBS issuances totaled $7.87 billion in January\u2014a year-over-year increase of 40 percent\u2014and nearly $9 billion through Valentine\u2019s Day, according to Trepp. <\/p>\n\n\n\n

Observers are quick to point out that most office properties remain out of favor. The uptick in office deals in many cases represented a bounce off of the investment sales bottom\u2014and potentially the bottom of valuations\u2014than it did a full embrace of the sector.<\/p>\n\n\n\n

\u201cThere are some green shoots in office, as we knew there would be,\u201d observed Millon. \u201cBut we need to see leases materialize and demonstrate that corporate occupiers are committed for the long term.\u201d<\/p>\n\n\n\n

\"Tall<\/a>
CBRE\u2019s Debt & Structured Finance Group recently arranged $145 million of acquisition financing for Bank of America Plaza at Las Olas City Center, a 410,000-square-foot tower in Fort Lauderdale\u2019s financial district. Deutsche Bank and J.P Morgan originated the loan, which was later securitized. Image courtesy of CBRE<\/em><\/figcaption><\/figure>\n\n\n\n

Time to expand<\/h2>\n\n\n\n

While multitenant industrial assets account for a large slice of CBRE\u2019s nonmultifamily capital markets opportunities, noted Millon, debt providers want to diversify into shopping centers and hospitality assets, which have experienced fundamental improvement since the pandemic lockdowns. <\/p>\n\n\n\n

As part of that trend, data centers leased by major investment-grade tenants have also become a preferred asset class, said Lavipour. Just as they are doing with other large financings, banks are taking small syndicated positions in data center loans of around 10 or 20 percent, he commented. Still, the amount of debt chasing the properties has made it difficult for some lenders to justify participation in the deals.<\/p>\n\n\n\n

\u201cWe haven\u2019t seen data centers as a great credit opportunity\u2014they feel a little overbought,\u201d explained Lavipour, who is also on Affinius Capital\u2019s investment committee for credit and equity products. \u201cBut we love data centers on the equity side.\u201d<\/p>\n\n\n\n

Regulation speedbump<\/h2>\n\n\n
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\"Will
Source: CBRE Research, MSCI Real Assets, Q4 2024<\/figcaption><\/figure><\/div>\n\n\n

Despite their return to the market, banks face a potential stumbling block when Basel III Endgame takes hold, which is scheduled to occur in July. The bank-strengthening rules would require institutions to significantly raise their capital reserves and take other risk-mitigating measures.<\/p>\n\n\n\n

Although regulators have said that the proposed regulations could change, some banks are already moving away from direct commercial real estate lending and instead are acting as warehouse capital providers, said Lavipour. (Banks are also discovering the benefits of providing \u201cback leverage\u201d to debt funds.) <\/p>\n\n\n\n

In the long run, the tightening regulations could drive<\/a> more borrowers to debt funds and other alternative lenders, the proposal\u2019s critics contend. <\/p>\n\n\n\n

Indeed, banks already have largely stepped back from making construction loans, which is giving credit houses like BGO more access to the deals, observed Abbe Franchot Borok, a managing director & head of U.S. debt with the firm. As part of the alternative asset management division of Sun Life, BGO also sees a larger opportunity to make bridge loans to value-add investors, she added.<\/p>\n\n\n\n

\u201cThe biggest headwind in the market has been a lack of transactions. But as volatility subsides, there are going to be opportunities in asset classes that until now have been on the sidelines.\u201d <\/p>\n\n\n\n

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Read the April 2025 issue of CPE.<\/a><\/em><\/p>\n\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

The pickup in transactions in late 2024 is fueling optimism in 2025.<\/p>\n","protected":false},"author":890,"featured_media":1004752696,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1521,21808,21825,21783,51037],"tags":[],"class_list":["post-1004752675","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-digital","category-featured","category-finance","category-investment","category-trends"],"acf":[],"yoast_head":"\nCRE Lenders Banking on Deal Momentum - 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\/cre-lenders-banking-on-deal-momentum\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"CRE Lenders Banking on Deal Momentum\" \/>\n<meta property=\"og:description\" content=\"The pickup in transactions in late 2024 is fueling optimism in 2025.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/cre-lenders-banking-on-deal-momentum\/\" \/>\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=\"2025-04-02T23:22:50+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-04-03T15:04:52+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2025\/03\/iStock-2148247269-feature.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"900\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Joe Gose\" \/>\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\/cre-lenders-banking-on-deal-momentum\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/cre-lenders-banking-on-deal-momentum\/\",\"name\":\"CRE Lenders Banking on Deal Momentum - Commercial Property Executive\",\"isPartOf\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/cre-lenders-banking-on-deal-momentum\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/cre-lenders-banking-on-deal-momentum\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2025\/03\/iStock-2148247269-feature.jpg\",\"datePublished\":\"2025-04-02T23:22:50+00:00\",\"dateModified\":\"2025-04-03T15:04:52+00:00\",\"author\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/#\/schema\/person\/c65d4944b0b506742e79b5b1b9ecca26\"},\"breadcrumb\":{\"@id\":\"https:\/\/www.commercialsearch.com\/news\/cre-lenders-banking-on-deal-momentum\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.commercialsearch.com\/news\/cre-lenders-banking-on-deal-momentum\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/cre-lenders-banking-on-deal-momentum\/#primaryimage\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2025\/03\/iStock-2148247269-feature.jpg\",\"contentUrl\":\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2025\/03\/iStock-2148247269-feature.jpg\",\"width\":1200,\"height\":900,\"caption\":\"Finance. 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