A Private Lender’s Perspective on CRE Finance

CPE interviewed BridgeInvest's Alex Horn on the growing opportunities for non-bank lenders. With no end in sight for high interest rates, investors from all corners of the real estate industry are turning to private lending to get deals done. Alex Horn, managing partner & founder at private lender BridgeInvest, talked to Commercial Property Executive about a financing climate that enabled the company’s H1 2023 volume to surpass the total volume of deals reviewed in all of 2022. The Fed’s benchmark rate is the highestin 22 years and Chairman Powell indicated other increases are likely by the end of the year. What does this mean for the CRE landscape? Horn: After inflation spiked in December 2021, driven primarily by supply-side disruptions resulting from the COVID-19 pandemic, the Federal Reserve started raising interest rates to bring inflation down to its 2 percent target. Although inflation has significantly declined since peaking at 9.1 percent in June 2022, there is a real concern that there is still too much demand in the economy that could make the easing in inflation temporary, and that supports the argument that the Fed will need to keep rates higher for longer, with the Forward 1-month SOFR Curve increasing by approximately 175 basis points between March 31 and Aug. 31. The current expectation, according to the Fed’s dot plot, is that rates will peak around 4.6 percent at the end of 2023, before falling to 3.4 percent, 2.5 percent and 2.5 percent at the end of 2024, 2025 and 2026, respectively. Contrary to the Fed, the market is currently pricing in the expectation that the 1-month SOFR will decrease to around 3.4 percent by the end of 2026, according to Chatham Financial Term SOFR forward curves.

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