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Gantry Reports Steady Commercial Mortgage Production in Q1 2024, Anticipating Momentum for a Stronger Second Half of the Year

Gantry’s $18 Billion Loan Servicing Portfolio Remains at Strong Performance; Retail, Multifamily, Industrial, Medical Office, and Self Storage Assets Remain Prioritized Lender Targets; Life Company, Agency, CMBS, Debt Fund, and Credit Union Sources Continue to Backfill Bank Retreat

 

Gantry, the largest independent commercial mortgage banking firm in the U.S., reported a steady and improving pace for commercial mortgage production in Q1 2024 as price discovery adjusts to a higher rate environment and timely maturities motivate new assignments moving into Q2/Q3 2024. Acceptance of a new ‘higher for longer’ rate environment, liquidity in the market from bank alternatives, and overall market health outside of the office sector have kept the firm hard at work successfully identifying relevant financing options reflecting the demands of the current commercial real estate cycle.

 

“Our production teams are successfully sourcing debt solutions for our clients in a tough cycle. That’s not saying we aren’t working harder to optimize the outcome, but we are still securing viable loans for a wide range of borrowers,” said Gantry Principal Braden Turnbull. “The pullback from banks as a primary debt source for many elevates our role in the process as we lean into our roster of correspondent lenders and vetted capital sources to find viable funding alternatives. We have to expect that rates will remain in this new higher range for the foreseeable future, but regardless, for most properties we can still identify a workable debt program and structure.”

 

Representative Gantry transactions for Q1 2024 production include:

 

Production and Trends

Gantry's analysis of the Federal Reserve's recent communications suggests that U.S. capital markets are likely to maintain higher interest rates throughout 2024. While there may be hopes for Fed rate reductions this year, it's crucial to recognize that a return to pre-volatility levels is not expected in the near term. Nevertheless, the market is adapting, with price discovery aligning with the new cost of capital. Most performing assets and relevant developments are benefiting from ample liquidity, thanks to a diverse range of loan programs tailored to the current market cycle. Optimism persists for potential rate relief in the second half of 2024, as market rates appear to have stabilized, encouraging market participants to adapt, adjust, and engage in transactions.

 

“Our relationship with hundreds of CRE debt sources has made us a relevant partner for a client’s executive team as we navigate a tough cycle,” said Gantry Principal Paddy Ryan. “As banks have stepped back from the market to shore up their operations and process shifting regulatory policy, Gantry’s correspondent life company lenders are a reliable alternative for permanent debt and a wide range of construction-to-permanent, bridge, and participating loans, often with some new flexibility on prepayment. Equally, we have working relationships with hundreds of capital sources including CMBS/Conduit, Debt Fund, Agency, Credit Union, Private and even still Bank lenders that all have their merits and can offer attractive programs for a range of borrower requirements.”

 

Relevant trend considerations for commercial mortgage production looking forward include:

  • There has been a shift from optimism surrounding interest rates coming into the year to uncertainty with higher rates and volatility. This has created friction in the market putting pressure on commercial real estate financing. Fortunately, the amount of debt capital that remains in the market ready to be deployed is strong at this time. Borrowers and lenders will find balance when forced to transact in a higher interest rate market.  

  • Pending maturities on performing assets are refinancing with relatively attractive permanent loan options for the cycle in 5-, 7-, and 10-year terms.

  • New construction funding is available from a range of sources for viable projects ready to break ground or refinancing entitlement and land carry costs.

  • Life companies remain an active and reliable source for non-recourse financings at compelling rates with a range of permanent, participating, and bridge programs.

  • Agencies remain active with attractive programs for multifamily borrowers that can include interest only terms and 35-year amortization for qualifying sponsors and assets.

  • Agencies are aggressively competing to deploy allocations to assets that meet their affordability requirements, offering even more attractive terms on permanent debt.

  • Conduit lenders are active in the market again with new 5-year and traditional 10-year CMBS programs for sponsors requiring higher leverage.

  • Credit Unions are a resource for smaller transactions, with comfortability across a range of asset classes including retail, multi-tenant industrial, medical office and apartments.

  • Debt funds are active in the bridge and construction space. Bridge to Bridge is a viable option for projects still in transition or delaying construction.

  • For assets requiring new equity to right-side debt service coverage requirements, participating loans, preferred equity, and mezzanine debt are available options.

 

Servicing and Culture

Gantry maintains its distinction as a Primary Servicer rated by Standard & Poor’s. With an $18 billion portfolio encompassing over 2,100 unique loans spanning the entire range of CRE asset categories, the firm's portfolio performance consistently meets 100% of expectations. Even two years after the onset of rate spikes and the subsequent performance challenges of the current cycle, Gantry's portfolio resilience stands as a testament to the collective efforts of its dedicated teams, from loan origination to accounting and professional services. Gantry's exclusive dedication to commercial mortgage banking fosters a cohesive, client-centric culture throughout the organization, extending from loan origination to servicing, and beyond maturity.

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