Hudson Realty managing director Renee Lewis helped guide Hudson through the real estate market downturn that led to the recession. As the economy continues to recover, Hudson (and others in the real estate debt sector) will take advantage of opportunities created by the contraction of community bank lending.
What do you view as the biggest challenges facing the real estate financing market in 2014? How do you plan on addressing those challenges?
While we’ve come a long way in the recovery process, the banking sector is not yet fully functional, and this creates new opportunities for Hudson Realty on the lending side.
Where are the areas where you see opportunity? How are you approaching those opportunities?
We believe there are compelling niche lending and investment opportunities given the continued lack of liquidity for borrowers who are seeking to refinance maturing debt, particularly as it relates to the small and mid-sized banking space and middle-market assets under $30M, which is where we typically operate.
In addition to the NY-metro area, we’re focused on lending in markets such as Texas, the mid Atlantic region including the Carolinas and Tennessee, and Florida, and on the acquisition side, we’re seeing a opportunities in the West and Midwest including Colorado, Kansas, Illinois, as well as the Mid-Atlantic and South.
Are there any macro/regulatory factors that you see changing in the next year?
We expect to see continued consolidation among community banks due to increased regulation and associated compliance-related costs.
As such, we believe there will be opportunities to acquire entire loan portfolios as these institutions seek to de-lever and de-risk.
While the regulations related to CMBS issuers and investors are finalized over the next year, we believe the clarity to the marketplace should benefit our bridge lending programs. Specifically, risk retention guidelines should help ensure CMBS remains primarily a provider of longer term financing for properties with stable cash flows at modest leverage levels.