Commercial Real Estate Financing State of the Market | April 2024
Terrydale Capital
Apr 1, 2024 8 Min read
Terrydale Capital is dedicated to providing a wide range of financial services to meet the diverse needs of our clients. We prioritize staying abreast of the ever-changing market landscape by fostering continuous dialogue with our network of capital market specialists. Moreover, we proactively explore emerging funding avenues that are garnering significant interest. As part of our commitment to keeping you informed amidst the dynamic market environment, we have compiled financing rates from various regions nationwide.
Private Money: Rate Range: 8.20% - 12.50%
Amidst ongoing market softening, private money lending continues to hold sway as an attractive option for expediting transactions in 2023, a sentiment that endures. Its inherent advantages and flexible short-term nature render it an appealing choice in today's financial milieu, albeit with the caveat of potentially higher rates and broader interest rate spreads.
Debt Funds & Bridge Lenders: Rate Range: 6.50% – 10.95%
As 2024 continued forward, we have seen a marked shift in executions coming from debt funds compared to 2023. Last year, the majority of executions were done through bank and credit union options; whereas, 2024 has seen a near 180 degree flip towards debt funds being our primary financing executors. These financial instruments hold significant appeal for individuals seeking to manage risk and pursue financial growth, owing to their inherent advantages and short-term flexibility.
CMBS: Rate Range: 6.50% - 9.50%
The continued interest in Commercial Mortgage-Backed Securities (CMBS) remains unabated, propelled by the potential for lower interest rates compared to alternative financing channels. With available options offering rates in the low-6% range, this avenue proves to be a valuable consideration for commercial investors. As of late, CMBS has has a large surge in executions due to favorable programs and availability.
Commercial Banks: Rate Range: 6.15% - 10.50%
Carrying over from 2023, banks have maintained more stringent underwriting procedures, emphasizing the significance of existing clients and depository relationships. Although this trend is continuing in the early months of 2024, banks have concurrently offered competitive pricing, resulting in some of the more favorable rates available in the market.
Credit Unions: Rate Range: 6.84% – 10.25%
Credit unions have distinguished themselves from other lenders by offering borrowers the advantage of lower interest rates, rendering them an attractive choice. It's important to acknowledge that credit unions typically adhere to a meticulous lending approach, involving a thorough underwriting process that may result in extended closing times, particularly given the current market conditions. While credit unions provide competitive rates, borrowers should anticipate potential delays in loan approval and closing due to the comprehensive nature of their underwriting procedures.
Fannie & Freddie: Rate Range of 5.75% – 7.82%
Transactions involving Fannie Mae and Freddie Mac persist in demonstrating resilience, highlighting their stability. These transactions are widely regarded as some of the most advantageous options for residential and multifamily properties. Increasingly, buyers are opting to decrease leverage, willingly injecting additional equity to secure more favorable interest rates. Embracing this strategic approach enables them to leverage current market conditions and secure improved financing terms for their investments.
FHA: Rate Range: 5.65% - 7.85%
The current interest rate trend concerning FHA loans in the commercial real estate sector presents borrowers with a valuable opportunity to smoothly transition from construction and bridge loans. This shift can be particularly advantageous for individuals seeking financial stability. Choosing FHA loans amid a rising interest rate environment allows borrowers to access long-term financing options, offering increased stability and potentially lowering overall expenses.
HUD: Rate Range: 5.50% +
Gaining prominence as a significant financing option in the latter half of 2023, HUD is positioned to continue serving as a dependable vehicle for investors in 2024. Offering noteworthy Loan-to-Value ratios of 90% for acquisitions and 80% for refinances, coupled with 35-year fully amortizing, non-recourse loans, HUD emerges as an ideal choice for various scenarios. Whether it pertains to new builds, later vintages, multifamily properties, or long-term holds, HUD financing excels at optimizing cash flows.
SBA: Rate Range: 7.25% - 10.00%
The Small Business Administration (SBA) has emerged as a valuable option for both novice investors and those aiming for lower initial down payments. This choice has demonstrated its advantages, especially for owner-occupied properties. Moreover, there is a growing trend among investors to consider transitioning from the SBA 7(a) program to the 504 option, particularly for refinancing purposes.
Life Company: Rate Range: 6.25% - 9.75%
Leveraging creative strategies and maintaining flexible asset preferences, LifeCo options can provide competitive rates in the low 7s. Actively lending on all asset classes. Call us to learn more.
In today’s market, there are many options available for structuring deals, and Mezzanine and Equity financing enable our clients to pursue larger projects. Experienced and qualified investors may even be able to secure a deal with as little as a 5% down payment. Moving into 2024, we expect to see a surge in activity regarding this avenue.
Partner With Terrydale Capital for Your Debt Financing Needs
When it comes to debt financing, understanding the right timing, process, and options is crucial. At Terrydale Capital, we provide a comprehensive range of commercial loan solutions tailored to meet your business's unique needs.
Success!
Product has been created successfully!
Headquartered in Dallas, Texas, Terrydale Capital is a leader in commercial real estate financing. We have close relationships with the nation’s top banks, lenders & family offices allowing us to provide the most competitive financing solutions in the market.
