Growth Is Ahead For Alternative CRE Lenders — If They Approach Opportunities The Right Way

The last five years have put pressure on all aspects of commercial real estate. Rising interest rates, reduced postpandemic demand for traditional assets, and the digital evolution of all aspects of people’s lives are all impacting the sector. While the Federal Reserve continues to lower interest rates, they are unlikely to return to the lows seen in previous years. 

However, there are undoubtedly opportunities for lenders other than traditional institutions in today’s economic landscape, SitusAMC Head of Commercial Real Estate Anne Jablonski said. The high level of loan maturities provides fuel for growth — if alternative lenders prepare effectively. 

“With many loans set to mature in the next two to three years, borrowers that urgently need to refinance and have previously relied on banks may find themselves shut out as the banks pull back,” she said. “This is creating a financing gap that can be readily filled by alternative lenders. Now is the time to position themselves for growth.”

The first step an alternative lender should take to maximize opportunities is to make the most of their ability to be flexible, Jablonski said. While banks are constrained by loan-to-value policies and debt service coverage ratios, nonbanks can be more creative.

SitusAMC works with more than 70 of the top alternative lenders in the industry, providing support across the life cycle of their lending and investing activity. This includes origination and transaction support, servicing and asset management, special servicing, and debt and real estate valuations.  

“Alternative lenders are well positioned to adapt to market conditions and make quick decisions when they see an opportunity,” Jablonski said. “By embracing their vantage point outside traditional banking confines, they can perhaps increase leverage or originate loans with much more creative structures.”

A second step that could boost an alternative provider's chances of success is to work with a suitable adviser, Jablonski said. Nonbanks often have leaner teams, with staff members taking on several roles. Outsourcing can enable a small lender to take on projects bigger than it might otherwise be able to handle or refocus its in-house team on higher-value functions such as borrower satisfaction or business development.  

A third party can take on all the work involved in ensuring a borrower meets lending criteria, such as analyzing balance sheets, rent rolls and income statements. They may need to carry out research on a property’s physical condition, title history or environmental risks. 

“If a lender has the support and resources of a third party behind them, they can analyze a borrower’s financials and strategy much more quickly and efficiently,” Jablonski said. “Our team knows where to look, how to carry out due diligence effectively and understand a property’s value. Determining the viability of a loan becomes much more achievable.”

Alternative lenders can also benefit from outsourcing the servicing and asset management of their portfolio, SitusAMC Senior Director of CRE Client Services Ji Won Sin said. 

Primary servicing includes time-consuming administrative tasks that distract from the lender’s core mission of deploying capital, she said. Tasks include monitoring borrower payments and property conditions, financial reporting, cash management and the management of taxes and insurance. 

SitusAMC offers many of these services to clients. Primary servicing includes onboarding loans, monitoring a property and managing assets throughout their life cycle. Asset management includes aspects such as monitoring covenants, credit administration and borrower consent actions.

“Outsourcing these tasks can be a great opportunity for lenders to bring in experts with experience in all these areas,” Sin said. “We carry out all time-consuming activities, then provide a reporting package that gives a clear picture of asset or portfolio health. This frees lenders up to do what they do best: manage investor relations and create growth strategies.”

This article was produced in collaboration between SitusAMC and Studio B. Bisnow news staff was not involved in the production of this content.

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