Firm Exceeds 2021 First Half Production by $700 Million; $18 Billion Loan Servicing Portfolio Performing at 100%; Lenders Becoming More Disciplined Moving into Second Half of 2022 in Response to Economic Shifts, Remain Well Capitalized with Abundant Origination Bandwidth
San Francisco, Calif. – Gantry, the largest independent commercial mortgage banking firm in the U.S., completed $2.8 billion of commercial mortgage production in the first half of 2022, exceeding the firm’s 2021 first half production by $700 million. While this was a healthy level of production for the first half, surpassing Gantry’s internal forecast at the beginning of the year, expectations are for a steady Q3 2022 as buyers, sellers and borrowers reset, adjusting to new rates and challenges with macroeconomic realities.
“Gantry met and exceeded its expectations for commercial mortgage production in the first half of 2022, and while commercial real estate is facing some headwinds in the current market climate, deals are still getting done moving into the second half,” said Gantry Principal Andrew Mekjavich. “When market conditions shift and rates move sporadically, Gantry’s role as a strategic advisor becomes integral to the value of our mortgage banking services. We continue to remind our clients that an abundance of deployable capital resources is motivating lender allocations to new originations at what remain conducive rates and terms for refinance, acquisitions, and new development sponsors. Our ability to secure capital from hundreds of sources, including our correspondent life companies and roster of banks, credit unions, debt funds and CMBS lenders, allows us to pair borrowers to the appropriate funding source tailored to their specific goals.”
In terms of capital allocations, Gantry’s First Half 2022 originations were defined by the following (ranked in descending order):
Asset Class: Multifamily, office, industrial, retail, and self storage.
Loan Volumes: Life companies, banks, and bridge lenders as top funding sources.
Loan Values: Life companies, banks, and bridge lenders for total loan values.
Notable trends in relevant Gantry verticals include:
Gantry produced $2.8 billion in commercial mortgages in the first half of 2022 and originated 162 unique loans totaling $1.73 billion in Q2 2022, exceeding its quarterly performance expectation. Life companies, banks, credit unions, and bridge lenders have been the most active commercial mortgage sources funding Gantry clients to date in 2022. Life companies continue to be the preferred source for long-term fixed rate financing, with rate lock at origination offering a competitive advantage. Bridge and shorter-term loans, including floating rate options, were prevalent first half capital sources, especially for borrowers acquiring multifamily, retail, industrial and self storage value add assets, as well as challenged office assets. It is no surprise that office continues to face headwinds in today’s market, but Gantry saw a dramatic increase in Q2 2022 office production, demonstrating that financing options for this challenged asset class have emerged post-COVID.
“The rising interest rate environment has resulted in a borrower mentality shift pivoting from floating rate loans to fixed rate financing options, primarily due to the forward looking SOFR curve and substantial increases in rate cap costs. Long-term financing remains at attractive rates and in line with the generational norms of previous cycles prior to the more recent era of historically low rates,” said Gantry Principal Andy Bratt. “Our ability to rate lock at application with our life company lenders has led to highly successful outcomes for borrowers over the past 12 months. This bodes well for our borrowers refinancing pending maturities, many of whom are choosing to lock in rates at the earliest opportunity at low leverage as a hedge against rate volatility and any future increases, as well as fixed rate bridge options for value-add acquisitions removing interest rate volatility from the borrower’s business plan.”
Key trends to consider from Gantry’s first half 2022 production totals include:
Lenders will prioritize lower leverage borrowers for their best rates and terms.
Rate lock at application is an advantage for life company lenders in the current environment.
Life company lenders continue to be active in bridge, mid- and short-term lending, competing more directly with banks and debt funds in this space.
Construction and development financing for multifamily, industrial, self storage, and medical office/healthcare projects is readily available at attractive rates for projects that have long term horizons.
While agency lenders prioritize allocations to affordable housing in 2022, life companies are stepping up to fill the void with attractive options for market rate multifamily loans.
Gantry prides itself on the experience, dedication, and longevity of its employees, and proudly acknowledges their service to the firm at 10- and 20-year increments. In 2022, the firm is celebrating five employees, four of which reached their ten-year milestone and one who reached twenty. Employees reaching these milestones are provided with a one month paid sabbatical in addition to their annual PTO. With approximately 40% of the firm’s employees having served 10 years or more, Gantry continues to invest in the value of loyal service while striving to create a work environment encouraging continued professional growth and a healthy work-life balance.
Gantry, a long-rated Primary Servicer by Standard & Poor’s, is seeing 100% of expected performance from its approximately $18 billion portfolio of serviced commercial mortgages spanning more than 2,100 loans in 43 states. These loans represent financings in every asset class, including hospitality and office, which remain the most challenged sectors post-COVID.