February 24, 2020
Although lenders are heading into 2020 with continued optimism about stable to strong deal velocity, they’re also staying disciplined when it comes to lending requirements. Accordingly, says the 2020 RCM LightBox Investor Sentiment Report, any developer who relies on capital to keep the business moving may need to be prepared to expand lending sources.
“The difference in this cycle versus similar points of other cycles is that we all have a lot more equity in the deals than what was done historically,” said Tracy Ayers, CCIM, senior managing director of Renasant Bank in Nashville.
Today’s discipline is, in some instances, evolving into a more defensive posture, RCM LightBox says. Steps lenders are taking include:
• Examining loan-to-value ratios more closely, factoring in more conservative property values as a hedge against a continued market slowdown.
• Looking at debt exposure individually by property, tenant, business line and local fundamentals, instead of overall asset class and geography.
• Evaluating property cash flow more carefully, to identify tenant credit risks in anticipation of a slowing economy.
Most lenders have established allocations, which can limit what they can lend if allocations have been met or are getting close, says RCM LightBox.
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