Performance Exceeds Expectations Following Year of Rate Volatility and Market Disruption; Liquidity Not an Issue with Lenders Ready to Lend in 2023 as Market Resets to New Rate Climate
San Francisco, Calif. – Gantry, the largest independent commercial mortgage banking firm in the U.S., has completed $4.93 billion of commercial mortgage production in 2022. Despite macroeconomic headwinds and the subsequent volatility in financial markets, Gantry’s 2022 performance neared its record production total of $5.15 billion in 2021, with 2022 becoming the firm’s second strongest production year across three decades of continuous commercial mortgage banking operations.
“Last year was a tale of two halves, where after record setting Q1 and Q2 production totals, the market slowed for price discovery during the second half of the year,” said Jeff Wilcox, with Gantry. “Despite the challenges, we have an experienced team that has successfully navigated cycle shifts in the past and operates proactively from that perspective. Our response was to dig in, assess new realities, and proactively work with clients to identify the best options to meet their objectives. Although we expect a continued slowdown of asset trades during price discovery in the first half of 2023, a significant volume of maturities this year means we will still be aggressively working to identify attractive financing options for borrowers with timely and/or opportunistic needs. We are confident for the year ahead in our ability to navigate the changing marketplace. Commercial real estate is still performing as evidenced by our servicing portfolio and liquidity amongst many of our lenders remains high, at least on par with 2022.”
In further, demonstration of the firm’s strong 2022 performance, Gantry’s $17.5 billion national servicing portfolio continues to record no delinquencies across all asset types. This performance can be attributed to Gantry’s active relationships with its borrower-clients as both originator and servicer, realistic underwriting at the time of placement, and the firm’s advisory role when tailoring financing to best fit a borrower’s specific investment plans. The portfolio will be monitored very closely for changes in performance, maturities and tenant rollover as year-end reviews are conducted.
Gantry originated 476 unique loans during 2022 consisting of every type of commercial asset class. Life company, regional bank, and credit union lenders funded 85% of Gantry’s production totals for 2022, with each lender type performing best for different borrowers. In terms of asset classes underwritten, Gantry continued to close office and retail loan transactions as well as lender preferred industrial and multifamily property types. Gantry also had great success financing niche asset classes like healthcare and self storage from a range of correspondent and affiliate lenders.
Key trends to broadly consider moving from 2022 to 2023 include the following:
- Price discovery and rate environment acclimation will carry over into Q1 2023, with the pace of asset sales slowing until cap rates adjust to meet current debt service thresholds.
- Maturities and refinance will dominate new production in 2023 as investment activity slows. Gantry expects considerable effort on identifying options for challenged assets.
- Rate lock at time of application is still a competitive advantage for life companies as rate volatility remains a viable concern moving into 2023.
- Life company lenders will be competitive and active in 2023 though they will be focused on relative yield versus corporate bond spreads.
- Regional banks and credit unions will continue to be an active resource for borrowers, but not as aggressively in 2022. Major banks continue to significantly curtail their activity.
- Development financing is readily available in traditional short-term and construction to permanent structures where equity is present and strong fundamentals are evident.
- Bridge lenders have become active in the current rate climate as a funding source for value-add investments and challenged maturities via attractive short term debt options.
- Long term fixed rate debt remains a viable option, with generous pre-payment structures at rates able to meet necessary debt service coverage requirements.
Gantry, a long-rated primary servicer by Standard & Poor’s, continues to see 100% of expected performance across its $17.5 billion national loan servicing portfolio encompassing more than 2,000 unique loans in 43 states. This portfolio represents loans in the office, industrial, retail, multifamily, mixed use, healthcare, self storage, hotel, and mobile home asset classes. Consistent performance to date, through the past three years, is a testament to Gantry’s strong working relationships with its correspondent lenders, copious underwriting standards, and the firm’s proactive and ongoing relationships with borrowers from loan placement through maturity.
Gantry prides itself on instilling a positive culture of inclusiveness and corporate citizenship as a core tenant of its operating vision. As part of these efforts, the firm has developed a philanthropic donation match program allowing all its professionals to amplify their personal support of qualified non-profit organizations through dollar-for-dollar donation matches. As an extension of this commitment, Gantry’s executive board of principals/owners also voted to allocate a substantial contribution for 2022, on behalf of the entire firm, in support of Jared Allen’s Homes for Wounded Warriors, a Scottsdale, Ariz., based non-profit organization dedicated to providing housing solutions to 100% disabled veterans across the United States.