What is everyone seeing in Bank Financing for Commercial/Investment Real estate

[H. Jack Miller]

I am curious what others are seeing with bank financing on CRE. We are seeing its very challenging, especially for out of state owners.

[Stuart Udis]

Have done over $15,000,000 in originations in the past 9 months and likely originating an additional $5,000,000 before end of year. This is what I'm seeing in the market: Leaning on existing lender relationships is generally the path towards originations these days. New relationship bank CRE borrowing is especially challenging. Balance sheet and depository relationships (some banks requiring upwards 10% of loan amount) are being prioritized over merits of the deal/collateral. Fewer banks willing to give credit for imputed equity even if generated through heavy lift entitlements. LTC/LTV also lower which combined with depository relationship makes borrowing even more capital intensive. Banks are less willing to budge on pre payment penalties knowing rates will likely ease and don't want to lose loans recently originated to better terms.

Until Fed begins to cut rates I’ve found alternative lenders in some cases to be competitive with banks on construction debt when considering the totality of factors (rate, leverage, depository relationships and pre- payment penalties). Especially for projects expected to be stabilized within a year that are refinance candidates. Still important to vet these alternative  lenders well. Many are adjusting their draw funding guidelines on the fly. I suspect because some are struggling with liquidity since  they are holding loans longer than anticipated because their borrowers are having difficulty refinancing off their books.  Federal along with state chartered credit  unions that are not permitted to charge prepayment penalties are also competitive right now on rate and more and more are building out construction platforms, although very conservative on construction originations.