The value of private lending in the for-sale housing industry
As a result of limitations placed on commercial banks by regulators, coupled with the effects of the coronavirus, the ideal capital stack has become harder to secure, and ultimately, this tightening is requiring investors to get creative. With some traditional banks still on the sidelines, an option more frequently availing itself to investors is private debt. Most investors interpret private debt as a financing option for sponsors with poor credit and/or limited experience. In some cases, that may be true, but more often and as is the case at Summit Capital Partners, LP, private lending is an alternative financing vehicle that provides short term, high leverage financing to experienced borrowers, specifically in support of single family and multifamily for-sale product. Although we briefly paused in March and early April, the increase in activity (buyer and loan) has been noticeable. Over the past 60-days, there has been a verifiable flight from the denser urban areas of New York City and Philadelphia to the suburbs of the Delaware Valley, central New Jersey and Long Island.