Gantry Reports Steady Commercial Mortgage Production Across First Half of 2024
July 26 2024 - 10:15AM
Business Wire
Gantry’s $18 Billion Loan Servicing Portfolio Continues Strong
Performance in Tough Cycle; Firm Anticipates Loan Production
Accelerating Through Second Half of 2024 as Markets Align for
Improving Borrower Conditions and Lenders Respond with Targeted
Programs
Gantry, the largest independent commercial mortgage banking firm
in the U.S., reports steady commercial mortgage production through
the H1 2024, with overall Q2 2024 production values essentially
mirroring Q1 2024 totals. While market activity remains subdued in
the cycle’s current rate environment, strong indicators point to
increasing demand for new originations moving into H2 2024 as the
market responds to pending maturities, price discovery, and an
improving policy climate with less volatility.
“Gantry’s loan production teams have remained consistently busy
in the first half of 2024, successfully financing a broad range of
assets and transaction types,” said Tim Storey, Principal with
Gantry. “Borrowers have had a year to process the current higher
rate climate as volatility has transitioned to consistency. Yes, we
are in a higher for longer cycle as compared to a decade of
historically low rates, but not at a point where most transactions
can’t be aligned with the cost of capital still readily available
in today’s market. If we see Federal policy shift to lowering rates
later this year as expected, we should see a boost in confidence,
overall improvement on rates, and an increase in transactional
activity.”
Representative transactions from Gantry’s Q2 2024 production
include:
Retail: $22.1 Million Permanent Acquisition Loan / Cityline at
Tenley – Washington D.C. Industrial: $16.25 Million Permanent
Acquisition Loan / Fed Ex Ground Facility - Portland Multifamily:
$14.4 Million Construction Takeout Financing / 801 Pearl St – La
Jolla Self Storage: $15.5 Million Acquisition Financing / Moove In
Facilities – New Jersey/Virginia Medical Office: $8.2 Million Life
Company Refinance / Irvine Medical Office Facility Office: $9.5
Million Life Company Refinance / Bureau of Land Management -
Phoenix
Production and Trends
The acceptance of a higher for longer rate environment has
settled in after a less volatile 12-month period where Fed Fund
rates have held steady, albeit at an era high. Subsequent
predictability has helped identify strategies for sales and
acquisitions, refinancings, and the new equity requirements of the
current rate climate. If the Federal Reserve follows through with
rate reductions this year, expectations are for a dormant market to
return to life. In a cycle where debt service coverage is more
relevant than leverage, conservative borrowers on performing assets
are still finding ample cash neutral or cash out solutions for
their maturities. Investment transaction volume continues to grow
as new equity requirements, pending maturities, and redemption
requirements shape mark to market price discovery.
According to Demetri Koston, Principal with Gantry, “Gantry’s
key value proposition in 2024 is our consultative role with
clients, focused on outlining specific investments goals and
identifying property-specific attributes. We then canvas a roster
of vetted lenders across the full spectrum of sources to identify
the right loan for a specific business plan. Gantry’s time-tested
and often exclusive correspondent relationships with most of the
nation’s leading insurance company lenders have proved most
valuable for our clients in this challenging cycle. The quality and
flexibility of their programs, including attractive spreads,
non-recourse terms, certainty of close, and rate lock at
application have made them the today’s preferred provider of
permanent debt and a new resource for higher yield bridge and
participating loans.”
Relevant trend considerations for commercial mortgage production
looking forward include:
- The Federal Reserve continues to signal rate drops later this
year. These adjustments will most likely be marginal before
material but should improve borrowing conditions.
- Life companies have emerged as the most consistent source for
permanent, fixed rate debt in the current cycle and continue to
deploy resources to their loan programs. They are now offering new
five-year products with prepay flexibility, participating loans,
and bridge programs in pursuit of higher yield.
- The challenges for banks in the current economic cycle continue
to sideline them from their once dominant role in commercial
mortgage origination. Banks remain an option for large depositors
and for variable rate, bridge, or construction originations.
- CMBS continues to hold appeal for assets requiring higher
leverage, with interest-only options helping borrowers maximize
debt service reach and increase proceeds.
- Debt funds remain active in the bridge-to-bridge, bridge, and
construction lending space. Their loans come at a price and require
underwriting to a clear exit strategy, but their flexibility and
ample liquidity have made them a competitive resource.
- Agencies remain strong competitors on multifamily loans,
lengthening amortization schedules and offering interest-only
options to maximize debt service potential with even more
attractive terms for assets meeting their affordability
requirements.
- The multifamily, industrial, and retail asset classes remain
favored targets for lender allocations in 2024 and make up a
significant percentage of loans to date. Self storage follows
closely with similar lender confidence. While office generally
struggles, exceptions exist, with medical office outperforming the
broader asset class.
- Retail power centers, neighborhood centers, and credit tenant
assets have performed in the current cycle and make up the bulk of
allocations to the asset class.
- Multifamily value add investments are struggling in the current
market cycle, as softening rents, expiring rate caps, and
increasing construction costs make them vulnerable when
refinancing. Solutions may require fresh equity or forced
sales.
- Gantry continues to specialize in loans for self storage assets
in all phases of the ownership cycle, with the firm’s life company
correspondents becoming a superior resource for new acquisition,
construction takeout, and existing asset financings.
Servicing
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 has consistently performed during
a tough market cycle. The breadth, depth, and capability of the
firm’s servicing division provides the foundation for Gantry’s
strong and often exclusive correspondent relationships with many of
the nation’s leading life insurance companies and conduit
lenders.
Culture
Gantry remains committed to developing future commercial
mortgage banking professionals through its summer internship
program, with participants joining its San Francisco, Los Angeles,
Orange County, and Upstate New York offices this year. These
interns will be immersed into the full Gantry platform, completing
loan production, servicing, and corporate operations assignments
with respective mentors in each field.
About Gantry
At Gantry, independent thinking is in our genes. As a privately
held firm, we take an intentional approach to everything we do. So,
as our industry consolidates and becomes less personal, we push
ourselves to ignore convention, to set a high standard and to
always prioritize people ahead of profits. With over 30 years of
experience of loan production and managing an $18 billion national
servicing portfolio, our firm leverages a well-established
correspondent-driven platform to construct the best financing
solutions for our clients. For those seeking a partner that
delivers more, we’re a little different. The right kind of
different. To find out how and why, click here:
www.gantryinc.com
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version on businesswire.com: https://www.businesswire.com/news/home/20240726077557/en/
Chris Egger CME Marcom chris@chrisegger.com
Peter Vestal pvestal@gantryinc.com