View from the Top: Drop in Debt for CRE – Now What?

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By: Ely Razin, CEO of CrediFi

CRE debt markets have continued to decline through the end of Q1 and this is a cause for concern. The signals are broadening, as lending to all asset classes has declined, nationally. Further concerning, an early preview of Q2 lending in NYC doesn’t add a sense of “summer fun”, as growth appears to be slowing in this weather-vane market.  For a full understanding of Q1 debt market trends, download our Q1 CRE Finance report here.

Now, not all is doom and gloom. In fact, amidst this drop, there are several important bright spots. Certain geographies continue to grow or, at minimum, hold their own. Likewise, certain asset classes are stronger than others. 

Further, amidst this market, some lenders are still competing to win, as indicated by shifting LTV levels, per region and per lender. At times, these LTVs can be downright aggressive, helping separate those that take on risks from those looking to shake it. CrediFi’s begun tracking LTVs per lender, region and asset class. There will be more to come on this soon.

For those considering entering the CRE Financing market, now may be a good time to take action – between these credit market dynamics and low interest rates.

Lending levels are, of course, not the only concern affecting CRE. In particular, new “rent regulation” in some states are likely to impact the market, especially the multifamily segment. The new regulation will impact multifamily in at least two ways. First, they will suppress revenue growth in affected buildings, thus affecting new loan underwriting. Second, they may retroactively hurt loans already originated, underwritten based on now-flawed assumptions.

Why does debt matter to the often buoyant world of real estate? CRE is a highly-levered asset class. This makes it dependent on debt markets. Any decline in these is a negative signal for CRE generally. Our study is, of course, adjusted for seasonality, as Q1 is typically a slower quarter than the prior Q4.

The one constant in life is change – including changes in these all-important debt markets. Navigating the shoals of change requires great information, to help make the right shifts. We at CrediFi have taken on the mission of providing transparency into these waters. 

Download our Q1’19 U.S. CRE Finance Outlook Report to get up to date on CRE lending activity.

Ely Razin is CEO of CrediFi, the leading source of data and analytics for commercial real estate finance. He writes about the juncture of finance and real estate, and can be reached at ceo@credifi.com.

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Mary has over 25 years of experience in sales and customer engagement, including more than a decade at Thomson Reuters. She is the former head of client services at Complinet, a global compliance and risk software company that was acquired by Thomson Reuters, and led account management for over 15 years at NYSE/Sector’s outsourcing services division. Mary has an MBA in information systems from Pace University and a bachelor’s of science in computer science from Hofstra University.  

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David Libman, a fintech and investment professional with 20 years’ experience in fields including finance, technology, new business development and real estate investments, is head of product at CrediFi. Previously, David was a vice president at New York-based iCapital Network, a financial technology platform for alternative investments, and director of acquisitions at Fieldstone Properties, a private real estate investment firm focused on investment-grade multifamily property. David is also the founder and former CEO of Globerex, the first real estate equity online marketplace.  

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Alex Veksler has 16 years of finance, data analysis and project management experience. He is a former vice president at Morgan Stanley, where he worked on product control of equity and fixed-income derivatives products as well as various projects involving finance and technology, such as revamping risk attribution and balance-sheet systems for profits and losses. Alex has previously worked at hedge funds, most recently as a director at Exigent Capital. He has a bachelor’s in computer science from Yeshiva University and an MBA from New York University.

Ely Razin

CEO

Ely Razin founded CrediFi in 2014 with Battery Ventures. A rare combination of seasoned corporate executive and technology entrepreneur, Ely previously served as global head of board governance for Thomson Reuters Accelus and head of business law for Thomson Reuters, after the software company he founded was acquired in 2004. The company, Expert Ease Software, developed AI-based software that automatically summarizes key deal terms for transactions in fields including capital markets, M&A and real estate. Ely began his career as a corporate and securities lawyer, and holds an LLB and MBA from York University.

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David Fajgman brings over 14 years of financial and managerial experience to CrediFi. Prior to joining the CrediFi team, he served as finance director of Bioness Neuromodulation Ltd., which develops and manufactures medical devices involved in neurological rehabilitation. He has previously worked in multiple finance roles at Thomson Reuters and as an accounting and consulting manager at Ernst & Young, where he was responsible for a wide range of clients, including companies listed on the Nasdaq and privately held high-tech companies. David is an Israel-licensed certified public accountant and has a bachelor’s degree in business and accounting.

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