Matt Rocco, president of Grandbridge Real Estate Capital, realizes this year may not maintain the exact same lending velocity as last year. However, he sees plenty of opportunities in workforce and affordable housing, as well as in industrial real estate. This, combined with plenty of capital, may keep competition fierce for strong commercial assets in the foreseeable future.
Many believe lending velocity may slow this year compared to 2018. What is your take on this?
Rocco: We expect transactional velocity will be flat or down slightly as compared to 2018. This year and 2020 only have modest maturity activity. As a result, many new refinancing assignments will come from floating-rate loans that are converting into fixed-rate loan terms.
Given the very flat yield curve, we anticipate many clients will move from these floating-rate loans to match their ownership objectives. They will likely seek fixed-rate loan terms at the same coupon rate as their floating-rate alternatives. We also expect lending volume from CMBS, agency and life insurance companies to be flat or slightly down in 2019 compared to the record year in 2018.
Are there any specific product types that seem particularly attractive in 2019?
Rocco: We expect to see robust transactional activity in affordable and workforce housing in 2019 and 2020. Market demand and financing fundamentals should remain very attractive for both of these asset classes, and we expect them to be strong performers in the multifamily space.
We also expect to see increased acquisition and financing activities for industrial assets nationwide. It is also noteworthy that many institutional investors are restricted to the top 30 metro markets for new commercial acquisitions or investments, so look for middle-market commercial real estate investors to migrate into secondary and tertiary markets as they search for higher yields.
What are the pertinent lending issues that owners and investors should have on their horizons in 2019?
Rocco: Owners and investors should look to match their ownership objectives with the markets’ attractive financing alternatives. There is a surplus of commercial real estate capital available for a relatively scarce pool of quality assets, and borrowers can secure exceptional financing. We expect interest rates and spreads to remain attractive, and the financing market will compete heavily for quality transactions and clients. Interest in commercial real estate assets as an alternative to fixed-income investments will continue to drive more investors into our market.
Can you talk about some of Grandbridge’s corporate initiatives for 2019?
Rocco: We are going to continue to innovate and expand our proprietary commercial real estate lending programs to meet clients’ needs nationwide. We are also looking to expand our national production footprint with key high-production performer additions to our team.