DebtX Team Market Snapshots August 18, 2020

The Tsunami Approaches-Hotel Loan Sales Surge

August 2020

It was difficult to generate a headline to best describe the last 30 days in our market. Outside looking in, sale results appear strong, and we have lots of conversations with buyside participants about how well pricing is holding up. While this is all true, there is no doubt that the world and market has changed in several ways in the last six months. A few observations below:

Investor registrations and requests to access our sales platform have increased. Investor participation and number of bids have also increased, not in every sector, but on the whole and in some cases by a lot. Over 200 NDAs executed for a $10MM hotel deal and ~150 for a small bank portfolio gets attention. Seeing 20+ final bids on some transactions should make one feel pretty good, right? Well, yes, but we also can’t help but notice that the bid ranges have increased as well. We are not talking about 3-5 point spreads. We’re talking about very large spreads, evenly distributed throughout a large field of bidders.

You can imagine the discussions when pricing and trading deals. Like with many asset classes these days, there are varying opinions about current and future value, replacement cost, future economic conditions, the impact of economic stimulus, government action and the path of the coronavirus. Discussions with 10 different investors can lead to 10 different outlooks, and lots of differing opinions of value.

So, what is the point here you may ask? Who cares as long as the target price shakes out in the end? The answer is that the target price, or pretty close, is still shaking out at the end but the path to get there is longer with more twists and turns (and anxiety!). If you sold loans yourself in 2017-2019, five calls to the right groups would likely get you there. That’s in the rearview mirror. Today, it’s 20X that number of calls and investors. Everyone has a different opinion of value: Some are backing off all pricing, some pass on certain asset classes and others are foot-on-the-gas looking for opportunities. Cast the net wide, talk to more investors, cover everyone and you’ll maximize your recovery, and ensure that you’re receiving a true market-high bid.

Key Highlights

The first month of any quarter is typically short on closings, and long on in market and pipeline discussions. July was no exception. We closed on a few and a couple will bleed into August, so today we’ll focus on a few portfolio management projects and strategies being executed by our bank clients. The hope is that by sharing these strategies we can help others with their portfolio management needs.

Representative Transactions

$120MM Performing Hotel Portfolio

Asset Class:
Hospitality
Location:
Nationwide
Sale Structure:
Individual loan offerings
Status:
Coming Soon
Seller:
Bank

$39MM NY Multi / Retail

Asset Class:
Multifamily and retail
Location:
Brooklyn and Manhattan
Sale Structure:
Individual offerings
Status:
Coming Soon
Seller:
Bank

$51MM NPL Healthcare

Asset Class:
Healthcare
Location:
Missouri
Sale Structure:
Individual loan offering
Status:
Closed
Seller:
Bank

$150MM Performing Hotel Portfolio

Asset Class:
Hospitality
Location:
Nationwide
Sale Structure:
Individual loan offerings
Status:
Closed
Seller:
Bank

$9MM Assisted Living

Asset Class:
Assisted Living
Location:
TX
Sale Structure:
Individual loan offering
Status:
Closed
Seller:
Bank

$39MM Performing Multifamily

Asset Class:
Multifamily
Location:
Predominantly CA
Sale Structure:
Pool
Status:
In market
Seller:
Bank

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