How is the current interest rate environment impacting loan performance, spreads, and investor appetite in your portfolio?

Peter B. Morral, Chief Development Officer & Co-Head of Originations,

Granite Point Mortgage Trust, Inc.

Following the effects of the pandemic, the rapid rise in rates created well-known challenges for our industry, putting pressure on business plans, valuations, and refinancing activity, most notably for floating rate borrowers. Notwithstanding those challenges, CRE CLOs have remained a resilient funding source for our industry.

How is the current interest rate environment impacting loan performance, spreads, and investor appetite in your portfolio?

The recent rally in rates has generally spurred positive deal activity in our loan book. We have seen an increase in loan payoffs – from both sales and refinancings – and new loan origination opportunities. The capital markets are proving to also be more liquid with an in increase in CRE CLO activity and demand from repo lenders, and financing spreads have tightened over the last year (on both asset and liability side).

Erik Gutman,

Principle, Head of Mortgage Lending, Prime Finance Partners

Darren Breda,

Executive Director, Affinius Capital

For loans originated pre-rate hike, the current interest rate environment is having an impact on leverage (stabilized LTV’s are higher than originally underwritten) as cap rates have generally widened even if cash flow /business plan performance is on plan (a result of higher base rates, yield premium investors require and lack of investment sale activity). Additionally, many of these loans, for example multifamily loans, are sitting on the books longer as they are unable to be refinanced without cash in and in many cases need to be modified unless the Sponsor can inject equity into the asset.

Rishi Bansal,

Chief Investment Officer, BankUnited

Fed is cutting rates but inflation is still elevated.
Corporate Spreads are tight.
Office properties have started to be liquidated/resolved.
First Brands and Tricolor problems are causing investors to ask more questions on trustworthiness.
Overall environment is very issuer friendly.

How is the current interest rate environment impacting loan performance, spreads, and investor appetite in your portfolio?