Is Detroit dead? Not according to Eugene Szkilnyk, a senior analyst in Integra Realty’s Detroit office. And that’s largely thanks to conduit lenders.
Szkilnyk, in a blog post for Integra Realty, writes that while lending from Main Street banks has all but vanished in Detroit, conduit lenders have stepped up. The reason? Conduit lenders offer loans that are backed by a pool of bonds. This means less risk when lending in an uncertain market.
And in good news for conduit lenders, they face little to no competition today in Detroit from local banks.
“The conduit lenders have a lot of money,” Szkilynk told Midwest Real Estate News. “They need to place that money. The investors are pressuring them to place money.”
And Detroit is a good option for these lenders because rates for loans are higher in Detroit because of the perceived risk of investing in the city. These means that the spreads on these loans are higher. Conduit lenders, then, will make more money on the loans they make in Detroit.
“I personally am inundated with conduit-lending requests today,” Szkilnyk said.
Are people surprised when Szkilnyk tells them that conduit lenders haven’t abandoned Detroit? Of course. Many view Detroit as damaged beyond repair, and the city’s recent bankruptcy filing hasn’t helped the city’s reputation.
But Szkilnyk says that the bad press tells only a part of Detroit’s story. The Detroit metropolitan area doesn’t just include the city of Detroit, he said. There are plenty of wonderful green spaces, entertainment options, cultural centers, restaurants and neighborhoods in Detroit’s metropolitan area, he said.
“Everyone has written Detroit off,” Szkilnyk said. “The positives don’t get portrayed. But there are plenty of positives in this area.”