Regulatory Burdens Fuel Growth of Private Finance

Transformative change in the why that deals are financed is likely going to come from the private finance industry, rather than the banking industry, according to Sabal Capital Partners’ Jason Pendergist. This is because the banking industry is fielding regulations that make it difficult to respond nimbly to clients’ needs and market fluctuations.

“As banks are undergoing regulatory pressure around their real estate concentrations and growing pressure around the analysis of the real estate transactions that they do participate in, we believe that there are a number of very good clients with very good assets across the country that are simply unable to get appropriate financing solutions today,” Pendergist, president and COO of Sabal, tells GlobeSt.com. “We believe that we have the opportunity to create a small-balance conduit that can bring a bank like experience with simplified loan documents and make-sense underwriting.”

As a result of the regulatory challenges that Pendergist notes, good deals and good clients have been overlooked in the market. “We look around the marketplace and see the ever-growing regulatory burden that is placed on banks and the ultimate impact that has on customers,” he says. “We see a swath of the market that is either being completely missed or under-served, particularly in that commercial real estate space.”

Pendergist recently transitioned to Sabal from the banking industry, and said that the move was motivated by his desire to create change in the finance market. He realized that these changes would not come from within the banking industry. “Given the regulatory hurdles that exist in the banking environment, to be able to see the real estate finance market evolve and grow as it needs to, we need to see more companies like Sabal,” says Pendergist. “We need to see financial services institutions step into the space and come up with new and creative ways to find product. There are way too many customers that are being left in the wayside in a post Dodd Frank environment.”

Pendergist isn’t the only banking industry professional that faced challenges within the industry as a result of the regulatory environment. “The impetus to form the ABA Commercial Real Estate Council was that a collection of us at heavily concentrated institutions across the country simply didn’t have access to the information that we needed to effectively navigate the ever-changing regulatory environment that we see in the banking space in a post Dodd Frank world,” he says. “The industry isn’t going to change the bank regulatory environment, and I realized that if I wanted to make meaningful transformative change to how deals get done, I was going to have to do that with a finance company rather than with a traditional bank.”