Capital Markets Rebound With Increased Liquidity

LOS ANGELES—After a volatile start to the year, the debt markets are back. The market rebounded in the third quarter with increased liquidity, and Shlomi Ronen, managing partner and founder of Dekel Capital. This is great news considering the slow down in the first two quarters of 2016 that some experts called a capital markets correction. To find out more about this shift, the market drivers behind it and which lending sources are still struggling, we sat down with Ronen for an exclusive interview.

GlobSt.com: What has led to the increased liquidity and lender rebound in the market?

Shlomi Ronen: It has primarily been the combination of lenders seeking to acquire new clients and an increase in pricing. We have seen a few banks that were previously not active in commercial construction lending enter the space in order to acquire new deposit relationships. One such lender, based in Southern California, recently allocated $1.5 billion to construction lending alone. We have also seen the pricing on construction loans increase to levels that make it profitable for debt funds to provide such financing.

GlobeSt.com: Which lending sources have rebounded the most? Are there lending sources still struggling?

Ronen: CMBS made a significant comeback from the early part of this year. The bond markets have somewhat stabilized, making it easier for these lenders to price the loans they are originating. Banks seem to still be wading their way through the new regulatory environment. I expect that this will pass and that they will start funding construction loans on a more consistent basis.

GlobeSt.com: What types of assets and what types of loan products are now popular in the last half of the year, and who is having trouble getting financing?

Ronen: Agency financing continues to be attractively priced and very aggressive, relative to the other fixed rate loan products available for multifamily properties. From a product standpoint, hotel financing is generally hard to attain, especially construction financing. From a market segment standpoint, the middle market borrowers ($5 million to $30 million loans), are continuing to find it challenging to secure construction loans.

GlobeSt.com: At the beginning of the year, there was a pretty dim outlook. How has actual performance compared to your forecast earlier this year?

Ronen: We saw significant turbulence in the capital markets at the beginning of the year from concerns over the slowing European economy as well as the Chinese economy. Those concerns seemed to have ameliorated by the acceptance that we are going to be in a low growth global economic state for the foreseeable future.

LOS ANGELES—After a volatile start to the year, the debt markets are back. The market rebounded in the third quarter with increased liquidity, and Shlomi Ronen, managing partner and founder of Dekel Capital. This is great news considering the slow down in the first two quarters of 2016 that some experts called a capital markets correction. To find out more about this shift, the market drivers behind it and which lending sources are still struggling, we sat down with Ronen for an exclusive interview.

GlobSt.com: What has led to the increased liquidity and lender rebound in the market?

Shlomi Ronen: It has primarily been the combination of lenders seeking to acquire new clients and an increase in pricing. We have seen a few banks that were previously not active in commercial construction lending enter the space in order to acquire new deposit relationships. One such lender, based in Southern California, recently allocated $1.5 billion to construction lending alone. We have also seen the pricing on construction loans increase to levels that make it profitable for debt funds to provide such financing.

GlobeSt.com: Which lending sources have rebounded the most? Are there lending sources still struggling?

Ronen: CMBS made a significant comeback from the early part of this year. The bond markets have somewhat stabilized, making it easier for these lenders to price the loans they are originating. Banks seem to still be wading their way through the new regulatory environment. I expect that this will pass and that they will start funding construction loans on a more consistent basis.

GlobeSt.com: What types of assets and what types of loan products are now popular in the last half of the year, and who is having trouble getting financing?

Ronen: Agency financing continues to be attractively priced and very aggressive, relative to the other fixed rate loan products available for multifamily properties. From a product standpoint, hotel financing is generally hard to attain, especially construction financing. From a market segment standpoint, the middle market borrowers ($5 million to $30 million loans), are continuing to find it challenging to secure construction loans.

GlobeSt.com: At the beginning of the year, there was a pretty dim outlook. How has actual performance compared to your forecast earlier this year?

Ronen: We saw significant turbulence in the capital markets at the beginning of the year from concerns over the slowing European economy as well as the Chinese economy. Those concerns seemed to have ameliorated by the acceptance that we are going to be in a low growth global economic state for the foreseeable future.