April 19, 2024
Episode Summary:
In this episode, Joakim Mortensen from CoreVest discusses the Evolution of Real Estate Investor Lending and the changes in investor lending in real estate over the past decade. Above all, he highlights CoreVest’s unique non-recourse financing, noting the underwriting process, property valuation, and the importance of market experience. Additionally, Joakim explains the challenges faced when introducing a new asset class to Wall Street, emphasizing the role of liquidity and industry collaboration. Consequently, the conversation explores the evolution of credit enhancements and loan features, along with the ownership transition from Colony Capital to Redwood Trust. Joakim further shares insights on current market challenges and opportunities, including the influence of rising interest rates and the significance of securitization. Finally, he concludes with a look at borrower profiles for CoreVest, particularly the typical characteristics of their clients.
Overview of Episode 42
In this episode, Craig Fuhr and Jack BeVier speak with Joakim Mortensen of CoreVest about the evolution of real estate investor lending. Mortensen discusses CoreVest’s early contributions and the company’s lasting impact on single-family rental financing.
Origin and Growth of CoreVest
Founded with capital from Colony Capital, CoreVest grew by providing middle-market investors with much-needed financing. As a result, CoreVest’s early non-recourse loan offerings set them apart, allowing investors to expand portfolios without personal guarantees.
Impact of CMBS on Real Estate Lending
By using a Commercial Mortgage-Backed Securities (CMBS) structure, CoreVest offered non-recourse loans, enabling growth in single-family rental portfolios. Accordingly, these CMBS structures attracted institutional interest and improved liquidity, which drove the evolution of real estate investor lending.
Non-Recourse Lending: A Game Changer
CoreVest’s non-recourse financing options allowed investors to avoid personal liability, boosting the industry’s appeal. Thus, this approach supported significant portfolio expansion by addressing middle-market investors’ specific needs.
Partnerships and Industry Collaboration
CoreVest collaborated with banks, bridging gaps where traditional lenders were limited. Not only did CoreVest fill a financing gap, but they also fostered a friendly competitive environment, where ideas are shared to support the evolution of real estate investor lending.
Looking Ahead: Trends in Real Estate Investor Lending
Consequently, as the market stabilizes, CoreVest anticipates more accessible capital for real estate investors. Mortensen believes the industry’s future depends on continued collaboration, enhanced liquidity, and flexible financing solutions.
