Commercial Real Estate Financing State of the Market | August 2024
Terrydale Capital
Aug 1, 2024 8 Min read
Terrydale Capital is dedicated to providing a wide range of financial services designed to meet the unique needs of our clients. We prioritize staying current with the ever-changing market landscape through continuous engagement with our network of capital market experts. Furthermore, we actively explore new funding opportunities that are generating considerable interest. To keep you well-informed in this dynamic market, we have compiled financing rates from different regions across the country.
Private Money: Rate Range: 9.00% - 15.00%
Private money lending continues to be an appealing option for expediting transactions. Its inherent benefits and flexible short-term structure make it attractive in today’s financial environment, despite the potential for higher rates and broader interest rate spreads. Borrowers should anticipate higher costs for hard money loans, which are offset by the advantage of closing deals in less than 14 days.
Debt Funds & Bridge Lenders: Rate Range: 5.50% – 11.00%
As we progress through 2024, there has been a notable shift in the sources of debt fund executions compared to the previous year. In 2023, banks and credit unions were the primary sources of these executions. However, in 2024, debt funds have emerged as the leading financial executors. These financial instruments are especially appealing to individuals seeking to mitigate risk and achieve financial growth, thanks to their inherent advantages and flexible short-term nature.
CMBS: Rate Range: 6.35% - 8.95%
CMBS has seen a massive resurgence as of late with an increase of nearly three times of issuances. CMBS represents 14% of all CRE lending. With the recent surge in CMBS executions the market has become oversaturated leading to some lenders either taking a brief pause or slightly raising their rates to counter to over issuance. Despite this, it represents a very attractive option for investors.
Commercial Banks: Rate Range: 6.00% - 8.50%
Banks continue to uphold rigorous underwriting procedures in the current high-interest rate market, prioritizing established clients and deposit relationships. This trend has persisted well into 2024 as we reach the back half of the year. As of late, larger banks have begun to feel the pressure in their CRE lending with concerns rising. However, smaller community banks don't seem to reflect this issue.
Credit Unions: Rate Range: 6.00% – 8.50%
Credit unions distinguish themselves among other lenders by offering borrowers lower interest rates, making them an attractive option. However, it's important to note that credit unions, like banks, typically follow a meticulous lending approach, involving a thorough underwriting process that can result in extended closing times, especially given the current market conditions. While credit unions provide competitive rates, borrowers should be prepared for potential delays in loan approval and closing due to the comprehensive nature of their underwriting procedures.
Fannie & Freddie: Rate Range of 5.32% – 7.50%
For investors in the commercial residential sector, Fannie Mae and Freddie Mac options are consistently considered some of the most advantageous avenues for residential and multifamily properties. Increasingly, buyers are choosing to reduce leverage by voluntarily injecting additional equity to secure more favorable interest rates. This strategic approach allows them to capitalize on current market conditions and obtain better financing terms for their investments.
FHA: Rate Range: 5.50% - 6.65%
The prevailing interest rate trend for FHA loans in the commercial real estate sector provides borrowers with a valuable opportunity to seamlessly transition from construction and bridge loans. This can be particularly advantageous for those seeking financial stability. Opting for FHA loans in a rising interest rate environment enables borrowers to access long-term financing solutions, enhancing stability and potentially reducing overall expenses.
HUD: Rate Range: 5.50% - 8.00%
HUD has emerged as a significant financing option, especially in the latter half of 2023, and is expected to remain a reliable choice for investors in 2024. With impressive Loan-to-Value (LTV) ratios of 90% for acquisitions and 80% for refinances, along with 35-year fully amortizing, non-recourse loans, HUD stands out as an ideal option for various scenarios. Whether for new builds, later vintages, multifamily properties, or long-term holds, HUD financing excels at optimizing cash flow.
SBA: Rate Range: 8.00% - 10.00%
The Small Business Administration (SBA) has become a valuable option for both novice investors and those seeking lower initial down payments, particularly for owner-occupied properties. Additionally, there is a growing trend among investors to consider transitioning from the SBA 7(a) program to the 504 option, especially for refinancing purposes.
Life Company: Rate Range: 4.95% - 9.00%
With the use of creative strategies and flexible asset preferences, LifeCo options can provide competitive rates in the low 7s. On top of this, many options actively lend on all asset classes. Contact us to learn more.
Mezzanine and Gap Financing:
In today’s market, numerous options exist for structuring deals, and Mezzanine and Equity financing empower our clients to pursue larger projects and bridge funding gaps that may arise. We've noticed an uptick in the demand for gap financing, as more investors seek to bridge the space between their available funds and lenders, often to maintain liquidity. Our Mezzanine connections are well-equipped to assist, although they typically require minimums of $2 million for certain deals to be feasible.
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.
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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.
