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The fear index is ratcheting up, banks are tightening lending requirements, and liquidity is leaving the marketplace. It seemed only yesterday; properties were going for 20% over asking, cash offers dominated the marketplace, and Americans wanted real estate of all types. It didn’t matter what shortcomings the property might possess. They sold and sold quickly. Fast forward six months and real estate is a pariah asset class. Innovative Capital Corporation is unique as it operates between private capital, equity, and commercial debt. We see all asset types, how they trade, and what banks and private investors do in real time. We are not looking back to see how a particular asset class performed last quarter. We are engaged in conversations daily and have an in-depth perspective on the market. This monthly update is the report from the front lines, and this is what we are seeing.

Rates and fees continue to rise. As banking tightens, more and more borrowers who would have been eligible for a traditional loan and no longer are approved are seeking bridge capital. Fast turn times and a relatively painless underwriting process make these loans attractive. We expect to see bridge lending to be a valuable resource moving forward.
Spec and construction requests have become virtually nonexistent. Except for multi-family, the lack of capital and sentiment regarding real estate has caused this segment of the market to contract significantly. 
C & I
The CPI rose 8.2% over the last 12 months ending September the feds keep raising interest rates, yet we have a positive direction with the amount of activity in the C&I and M&A transactions we are placing. 2021 was a banner year for the industry, and 2022 continued with a slightly ebbed flow in Q3. Despite the debt market challenges and economic concerns, we believe this will be the focus of our bank partners, who are chasing the more sticky small business and middle market loan requests. Albeit they expect that the business operating accounts come with the loans. Operating accounts are the target for banks to bring more deposits and business deposits are harder to move. Keep in mind bankers are well aware of the retraction in the debt markets and are pricing accordingly. We are turning over all stones to see where we can support our clients in moving or creating a new bank relationship. We back these strategies with non-bank credit options to determine what capital best serves the business now and in the future.

We believe asset pricing will continue to soften, and liquidity to continue to constrict. We believe this is the market’s first quarter that will take 18-24 months to correct. We see properties trading down until rates stabilize and the markets have time to digest the new normal. We believe debt, primarily short-term private capital, will generate the most significant returns for the foreseeable future.

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