Healthy Production From Pre-Maturity Refinance Fueled by Historically Low Interest Rates Overcomes Dearth of Maturing Loans; Gantry Set to Exceed $2 Billion Total Production in 2018 for Seventh Year
SAN FRANCISCO, CA – Gantry™, the largest independent commercial mortgage banking firm in the western U.S., completed $691 million of commercial mortgages during 2Q2018 across 61 unique transactions. Further, first half 2018 production totals of $1.1 billion indicate production is consistent with Gantry’s expectation of exceeding $2 billion of annual production for the seventh year in a row.
“Commercial real estate allocations have remained consistent from all our lending sources in 2018, even in retail which, however, still remains a case-by-case property category requiring significant underwriting,” said Michael Heagerty, Principal and CFO with Gantry. “While we anticipated a production slow down from the dearth of maturing loans requiring refinancing due to limited placements in 2009, real estate investors continue to seek early exit structured finance options to capitalize on rates that remain at historic lows. While primary MSA markets continue to be favored by capital sources resulting in a highly competitive market for top projects, lenders are also focused on identifying quality opportunities in secondary and tertiary markets where asset underwriting and sponsorship point to long-term performance. These trends point to a healthy second half in 2018.”
In terms of capital requirements for unique asset classes, the active property types for the first half of 2018 included industrial, multifamily and office; with the company’s Los Angeles, San Francisco and Seattle production offices continuing to show the highest placement volumes during the period.
Heagerty pointed to the following trends as worthy of consideration at the close of the First Half 2018:
-2Q2018 Production – Gantry is meeting its quarterly production goals in 2018 from forward-looking clients seeking to take advantage of historically low rates in early refinance transactions. This wave of activity is balancing out the limited number of maturing notes due to the lack of long term loan placements in 2009. Gantry is on track to exceed $2 billion for total 2018 production for the seventh year in a row.
-Secondary & Tertiary Markets – Lending sources have yet to meet 2018 allocations, and are focused on secondary and tertiary markets as well as the primary MSA’s when underwriting meets their qualification criteria. Qualified placements are often receiving multiple structured finance options to select from, with properties in top MSA markets still benefiting the most.
-Capital Sources – Life companies are the most active lending source for Gantry’s clients. These lenders are showing an above average appetite and resulting execution for commercial mortgage allocations.
-2018 Interest Rates – Interest rates are slowly increasing in 2018, but spread compression is compensating to keep commercial mortgage finance rates at historic lows in 2018.
-Legislative Agenda – Gantry’s executive leaders continue to work through industry peer organizations like the Mortgage Bankers Association, the Commercial Real Estate Finance Council and the California Mortgage Bankers Association to help shape the evolutions of Federal HVCRE, HMDA, and Tax Reform legislation. This is a primary goal for the industry in 2018 with long-term impacts. Gantry is committed to playing an active role in the outcome.
-Servicing – Gantry now services a portfolio of commercial mortgage loans for assets across the United States in excess of $12 billion. Loan performance is consistent with underwriting, with limited defaults requiring special service solutions or workouts, an indicator of healthy commercial real estate markets buoyed by a strong overall economy