The Ackman-Ziff Real Estate Group Debt Market Sentiment and Lender Survey

Lenders continue to be more aggressive, citing pressure to put money out for strong sponsors with quality real estate. (Re)development and construction activity as well as interest in secondary/tertiary markets are increasing.

The Ackman-Ziff Real Estate Group, LLC, has graciously provided us permission to print their lender survey which follows. Ackman-Ziff is a real estate investment banking firm based in New York.

Lender Appetite:

  • Lenders continue to be more aggressive; citing pressure to put money out for strong sponsors with quality real estate. (Re)development and construction activity as well as interest in secondary/tertiary markets increasing
  • Broader appetite for “durable” cash-flowing assets across all major asset classes. Transitional/value-add/development capital becoming more available
  • Healthy market for financing note purchases and Discounted Pay-Off (“DPO”)

Lender Underwriting Approach:

  • Fundamental real estate analysis is important; lenders focusing on “basis”
  • Lenders remain focused on underwriting of tenancy, “market” rents and occupancy statistics, lease rollover and associated costs
  • Debt yield, DSCR & LTV tests reverting to historic mean

Availability of Debt Capital:

  • Significant amount of capital (public and private) available to support debt financing market
  • Origination of CMBS well underway by commercial and investment banks; more than 25 capital sources originating for securitization; deep subordinate debt market
  • Life Insurance companies have become more aggressive; continue to focus on high quality assets in primary markets while seeking borrowers requesting long-term paper. Looking at forwards and select appetite for construction/permanent transactions
  • Foreign Banks focused on institutional quality, cash-flowing “stable” assets in major markets for “best in class” sponsors
  • Money center banks are active and aggressive on cash flowing assets, value-add and development deals for strong sponsors

Lenders in the Market

Institution

Loan Amount
(in $ Millions)

Term
(in years)

Rate

Insurance

$2 - $400

5 – 20

4.00% - 5.75%

Foreign Banks

$25 - $200

2 – 10

3.00% - 5.50%

Commercial Banks

$10 - $159

5 – 10

2.50% - 6.00%

Investment Banks

$7.5 - $300+

5 – 10

4.00% - 6.00%

Domestic Banks

$0.5 - $50

3 – 5

2.50% - 6.00%

Pension Funds

$10 - $75

5

5.00% - 6.00%

Private Lenders

$2 - $70

2 – 5

5.50% - 9.00%

Stephen R. Blank joined ULI in December 1998 as Senior Fellow, Finance. His primary responsibilities include: expanding ULI’s real estate capital markets information and education programs; authoring real estate capital market commentary; participating as a principal researcher and adviser for the Emerging Trends in Real Estate series of publications; organizing and participating in real estate capital markets programs at ULI events worldwide; and participating in industry meetings, seminars, and conferences. Prior to joining ULI, Blank served from December 1993 to November 1998 as Managing Director, Real Estate Investment Banking of Oppenheimer & Co., Inc. His responsibilities included: structuring, underwriting, and executing corporate financings including initial public offerings of common and preferred shares, unsecured debentures, and convertible bonds; property acquisitions, dispositions, and financing; and financial advisory services including mergers and acquisitions, corporate restructurings, and recapitalizations.
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