The Rise of Owner Financing

Creativity is the key to lending in a market rife with problems, and nowhere are those problems more evident than in the beleaguered office sector, where post-pandemic values have plummeted by some counts nearly 30% year over year. Just to have it said, the failure of workers to return to the office when they can choose hybrid approaches, a resultant decrease in space need on the part of corporate occupiers and the lingering inflationary market have all conspired to place enormous downward pressure on those values, and therefore on the banks that are underwriting them. 

In what Moody’s Analytics calls a coming “wall of maturities,” some $1.4 trillion in commercial loans is set to mature this year and next, putting inordinate pressure on banks and borrowers. However, a trend to watch now is the growing number of owner financings that are taking place, a creative solution in a market with unprecedented problems, and a solution already being embraced by some of the largest lending institutions in the world, including such names as JP Morgan Chase, Morgan Stanley and Capital One Financial Corp, as the newsletter CRE Daily reports.