Trends Watch: November 9, 2017
EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.
This week, Elana talks to Boris Grinberg, Managing Partner, GBCap Asset Management.
What is your outlook for direct lending?
With a potential targeted subset of $100 billion of annual originations, direct lending for real estate and other assets provides a strategic opportunity to build an investment platform that generates attractive returns with limited market volatility. Regulatory burdens and increased scrutiny are now limiting banks’ participation in asset-based lending. Dodd-Frank and Basel have dramatically increased banks’ costs of funding, so while banks have plenty of cash to lend, they are limiting lending to prime assets.
We believe that the business environment may improve, but it is unlikely to lead to a significant change any time soon. Basel, risk retention and high capital cost are likely to remain in place. When regulatory reforms do come, it will take time for changes in the lending environment to have a significant impact on our direct lending business.
What is your outlook for the economy?
While the economy seems to be steady and credit for the most part strong, there seems to be areas that need improvement. Certainly, health care costs and wage stagnation can be viewed as drags on the overall economy. Housing remains strong in larger city and coastal areas but surprisingly slow to recover from 2009 across the country. In fact, only 33% of all U.S. housing is back of the peak of 2009. We believe, given the demographics, that housing prices and rents will continue to be strong. We are also witnessing an aging stock of housing in the Northeast where the average home is 60 plus years old. This should be supportive to both the construction and fix/flip industries.
What keeps you up at night?
Running all aspects of an origination company along with a fund can be both exhilarating and exhausting. This also means you tend to “live” your company 24-7 as you constantly think of ways to improve. Luckily, I have a great crew who are committed to the success of the enterprise.