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Gantry Wraps Record $3.6B In CRE Mortgages As Rising Loan Rates Loom

Commercial real estate mortgage industry sees record gains.

The commercial mortgage industry is hitting historic highs.

San Francisco’s largest commercial mortgage banking firm, Gantry, completed $3.6B of new commercial mortgage placements during the first three quarters of the year and expects to near $5B by the end of the year, the company said in a statement Tuesday.

Year-to-date volume is ahead of the full 2020 year, when Gantry closed $3B in mortgage transactions, the highest in the firm’s 30-year history. 

“Although the potential for rising rates exists moving into 2022, we have yet to see a significant shift materialize in the lending environment,” Gantry Chief Financial Officer Michael Heagerty said in the release. “We continue to remind borrowers we remain in what can only be characterized as a generationally favorable financing climate.”

There is strong demand for commercial real estate assets as the industry works through pent-up deal flow from 2020 and sets new records in the wake of the coronavirus pandemic. Commercial real estate sales volume through the first three quarters of the year exceeded $462B, breaking the prior record set during the first three quarters of 2007, when the industry saw $448B of sales volume.

The $193B in commercial sales in Q3 alone was 19% more than the same period in 2019, according to Real Capital Analytics' latest U.S. Capital Trends report

“While the investment market remains heated with the abundance of capital competing for assets compressing cap rates and increasing valuations, the right tailored debt solution has become more critical than ever,” Heagerty said.

Gantry originated $1.5B in mortgages in Q3, representing 118 loans. The firm said life company, commercial mortgage-backed securities and GSE lenders are the most active in the sector, and they are the top choices for long-term debt. 

CMBS lenders remain an in-demand lending source in 2021 for legacy hold borrowers seeking more attractive financing options, according to Gantry. For the first three quarters of 2021, debt sources made $102B in loans that wound up being packaged into commercial mortgage-backed securities, according to data from credit reporting firm Trepp reported by The Wall Street Journal. That’s the largest sum since the same nine-month period in 2007. More than $7B of loans backed by office buildings and packaged into CMBS is coming due in the next 12 months, Bloomberg reports.

Loan servicers had 2,879 full-service hotels, 1,284 office properties and 1,243 retail properties on Trepp’s watchlist in July, according to an analysis by The Business Journals. Nationwide, hotels and retail are the most closely watched by loan servicers among all product types in the wake of the pandemic because they seem to pose the greatest risk of defaulting.

Gantry, which counts a $17B portfolio in 43 states, expects lenders to remain competitive in the fourth quarter, with some still looking to “make up for lost time during 2020.”