LOS ANGELES—Despite an extremely competitive lending environment, leverage today is nowhere near where it was just prior to the recession, said panelists at RealShare National Investment & Finance here yesterday. Panelists said the answer to whether we are in a lending bubble is an emphatic no.
In addition to leverage being lower than before the recession, “interest rates are lower than they were in 2005,” said Wayne Brandt, managing director, national originations director, real estate capital markets for Wells Fargo Bank. He did caution that there is more junk-bond issuance now, which is something to watch.
“CMBS Is Back” panel moderator Gary Tenzer, principal and managing director of George Smith Partners, compared today’s lending environment to “driving with one foot on the accelerator and one foot on the brake at the same time. There’s excitement, but it’s not the same level as in 2005 or 2006.”
Peter Lewicki of RBS Global Banking & Markets added that there are peaks and troughs in lending, while Eliav Dan, executive director of Ladder Capital Finance LLC, said that the cheap cost of debt is perpetuating lending activity.
CMBS is being more customer-service oriented since the recession, the panelists pointed out. “The difference is now borrowers call us if they’re having an issue with their servicer and we’ll straighten it out,” said Tom Burns, VP of Deutsche Bank. And Brandt added, “We get complaining calls every day and we know we have to respond.”
Brandt contended that the special servicers coming into this market are wiser than they were in the past, and Dav added that the special-servicing industry has evolved. “It’s not a perfect one, but they were overwhelmed in the past. They’re much better than they were five or six years ago.”
Panelists reiterated the theme of the conference: the lending landscape is extremely competitive. “Borrowers don’t want to refinance too early,” said Lewicki, and he added that projections are flat compared to where they were last year at this time. “There are a lot of new agents in the market. They’re chasing yield and going down the capital stack.”