This year’s Lenders Feature arrives at an interesting time. If you have a feeling of déjà vu reading that sentence, it’s likely as the past four years have been pretty “interesting” — to put it nicely (and keep this rated PG.)
The past 18 months, however, have been an especially rickety roller coaster of interest rate hikes, bank failures and heightened dislocation in our industry. And now, perhaps more than ever, the lenders who are actively transacting amid the volatility hold the keys to much of the commercial real estate industry’s success.
After all, as this period of pain and uncertainty continues, several owners now find themselves at something of an inflection point, and forced to make hard decisions about underperforming assets in their portfolios. If it isn’t time to sell those properties or hand back their keys, then it’s likely time to reposition, recapitalize, restructure or extend those assets’ debt.
Jurassic Park began with a single drop of blood extracted from a mosquito’s butt preserved in fossilized tree resin. Many commercial real estate properties are perhaps experiencing their own version of being suspended in amber right now — in more ways than one. As they await their next iteration or chance for life, it’s often their lenders who can give them the green light to proceed, to change, or allow them to idle at amber a little longer while they figure things out.
Still, when Commercial Observer asked one of our 19 Lenders over coffee what his personal theme of the past 12 months was, he didn’t say “Distress.” Instead, he offered “Adjusting to the New Normal.”
It’s a “normal” that many are finding pretty hard to stomach, understandably, and pretty darn expensive. For many, it’s also a “normal” of firsts for them. Increased borrowing costs and equity requirements, decreased leverage and a reduced lending playing field are all new realities borrowers must now face. Then, there’s the giant question mark of uncertainty over property values and interest rates that doesn’t seem to be getting much clearer with time.
As such, some are getting tired of waiting for a glimpse of the horizon— and we don’t blame them. After all, it’s been a long haul with awful bumps along the way.
In approaching this new normal, we’ve all traveled far. We’ve traversed the choppiest of seas — with a few rogue waves and various sea creatures en route — in our quest for a place of rest and equilibrium. But, Diana Nyad didn’t let four failed attempts at swimming from Cuba to Key West prevent her fifth attempt, and our industry will keep swimming, too.
If the past four years have taught us anything, it’s that — despite the fact that our roots are deeply embedded in soil, cement and concrete — change and adaptation is possible, as is a realigned model for our use of real estate and approach to transactions.
As we deboard onto this Island of the New Normal, we hope we won’t be eaten by its unfamiliar inhabitants but rather will find a new way to thrive there. We hope we can preserve and extract what’s still good in the amber, but also leave room for change, evolution and growth into the next chapter of our industry.
We also hope this island yields plenty of new opportunities to expand both portfolios and relationships. Now is the time to create and deepen ties as we work through the hard times together, but also make the most of the next two years’ opportunities with savvy investments and new ventures.
We can’t write the next chapter of commercial real estate — that’s up to all of you — but we hope it’s a good one. We’ve had enough nail-biters this past year to last us for quite a wee while.
And if you need a little break while navigating the Island of the New Normal for a while, word on the jetty is that Blackstone’s Jonathan Pollack opened a dive bar on the beach as a side business, and we’re sure he’d welcome you in.
So, pull up a stool, and settle into our Lenders feature. — Cathy Cunningham
