Navigating the No-Loan Landscape In the coming months, lenders will be selective when financing commercial real estate deals.
by Thomas Eddy T he failures of Silicon Valley Bank and Signature Bank have only added to the pressure on borrowers. Wary of further bank runs, lenders are moving to preserve capital and shore
However, even as margins tighten, today’s commercial real estate market can provide opportu - nities for those who invest wisely. THE RISE OF STORAGE As banks pull back from strug - gling asset classes like office space, they still have capital to place. Self-storage—alongside other commercial assets like industrial and multifamily—continues to be popular with both lenders and institutional investors. During the past few years, the industry has undergone rapid consolidation. In February, Public Storage made a bid to acquire competitor Life Storage at a
19% stock premium. When that effort proved unsuccessful, Life Storage was acquired by Extra Space Storage for $12.7 billion, approximately $1.7 billion over Public Storage’s earlier offer. This is part of a larger pattern. In 2020, Blackstone Real Estate purchased Simply Self Storage for $1.2 billion. In 2021, Public Storage paid $1.5 billion for a 56-facility portfolio. And in January 2023, the Prime Group announced it had closed its third storage fund at a hard cap of $2.5 billion, $1 billion over its initial target. With money flowing into the space and a solid track record of performance, self-storage remains attractive to lenders. For owners and operators, the challenge is finding the right financing. LEANING INTO LENDING RELATIONSHIPS As a limited partner, under - standing how your operator works with lenders can help paint a picture of how they will fare in the coming months. Since its inception, Spartan Investment Group has prioritized partnering with local lenders to obtain fixed-rate loans. Every lender has different objectives, loan programs, interest rates, and underwriting criteria. By establishing relationships with multiple lenders, operators can select the best loan terms for
up their balance sheets. For the commercial real
estate sector, this is particularly problematic. Commercial loans typically have a shorter life span than residential loans, meaning operators need to refinance every few years. More than $2.5 trillion in commercial real estate debt is estimated to mature in the next five years. Operators whose loans hit maturity when lending options are scarce may have no choice but to sell their properties.
32 :: INVESTOR REVIEW :: JUL-AUG 2023
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