MIAMI—How have the capital markets changed—and what X factors could cause more dramatic change? We caught up with Jordan Ray, managing director of the debt & equity finance group at Mission Capital Advisors in New York, to find out his take.
GlobeSt.com: How have the capital markets changed in the past 18 months and how are they likely to change throughout the rest of the year?
Ray: The markets have steadily opened up. CMBS volume is increasing. Banks that have cleaned up their balance sheets though loan sales are lending and getting more aggressive to compete for business that they were previously losing to the CMBS lenders.
Mission has arranged both renovation and ground up construction loans for condominiums and rental apartments as well as a number of hotel renovation loans. Much of the non-recourse renovation capital is coming from mortgage REITs, debt funds and other entrepreneurial bridge lenders. There are lender and joint venture equity bids for all good real estate deals again.
GlobeSt.com: Talk to me about the flow of capital from global sources into the U.S. What is going on there?
Ray: We closed a $45 million condominium construction loan at the end of last year with a German bank—and the German banks were reportedly slowing down. We closed a $27 million hotel balance sheet loan with a French bank. In general, European lenders are still very tight but the smart money is lending again to grow their balance sheets, reduce sub-standard asset ratios and work toward profitability. Asian capital has increased its presence but only for top tier assets in gateway markets.
GlobeSt.com: Any X factors in the global capital markets that could dramatically change the landscape?
Ray: Europe is really the X factor. Once European financial institutions really commit to selling substandard credits and lending at a grass roots level, their recovery will begin and accelerate. You cannot sell loans for high prices in markets where no lenders exist. It's acatch-22. The U.S. recovery is three to four years ahead of Europe. The good news is that once Europe recovers, this rising tide will raise all boats globally.
Come back this afternoon for part two of this exclusive interview.
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