A decline in CMBS markets have led to new ways of raising capital for US real estate players — and opening doors of opportunity for new waves of capital.
The EB-5 visa program has been a popular source of capital but concerns of fraud have put the program under a microscope and could end this year.
With fewer financing options and high interest mezzanine loans, real estate businesses are looking elsewhere for cheap capital, namely Israeli bonds.
Israeli bond issuance takes four-to-five months, with future issuances taking less than a month — a game changer for players who need capital fast.
Low interest rates around the globe increased businesses’ appetite for new capital to finance new projects and developments, including — and especially — for New York real estate developers and REITs.
Up until 2008, commercial mortgage backed securities (NYSEARCA:CMBS) – bonds sold to investors – were the most popular way to raise capital for new projects and for refinancing existing portfolios.
Since hitting an $867 billion peak in Q4 of 2007 (SIFMA excel sheet download), value of CMBS securities outstanding has been decreasing greatly.
As of late-June, there were $566 billion of the securities outstanding – a 79% year-over-year and down 34.72% since the 2007 high.
This comes after the housing bubble nearly a decade ago.
In the wake of the real estate market crash, domestic capital from CMBS has seen a tremendous decline. After reaching a $241 billion peak in ’07 CMBS issuance plunged to $102 billion last year, a whopping 57.81% drop.