Commercial Real Estate Financing State of the Market | December 2024
Terrydale Capital
Dec 2, 2024 8 Min read
Terrydale Capital is committed to delivering a broad spectrum of financial services, thoughtfully customized to address each client’s unique goals. We stay closely attuned to the evolving market dynamics through ongoing engagement with our extensive network of capital market experts. As re round out the year in the final month of 2024, stay on top of what is happening this November below.
Private Money: Rate Range: 9.50% - 15.00%
Private money lending continues to be an attractive option for accelerating transactions. Its inherent flexibility and short-term adaptability make it a valuable asset in today’s financial landscape, even in the face of rising rates and broader interest spreads. While hard money loans often come with higher costs for borrowers, the ability to finalize deals in as little as 14 days offers a significant competitive edge.
Debt Funds & Bridge Lenders: Rate Range: 6.00% – 11.00%
As 2024 draws to a close, there has been a notable change in the primary sources of debt fund execution compared to the previous year. While banks and credit unions dominated in 2023, 2024 has seen debt funds rise to the forefront as the leading financial executors. These funds appeal to those seeking to mitigate risk and foster financial growth, thanks to their inherent advantages and flexible short-term structures.
CMBS: Rate Range: 6.00% - 10.95%
CMBS has experienced a significant resurgence recently, with issuances increasing nearly threefold. Currently, CMBS accounts for 14% of all commercial real estate lending. With rates available in the low-6% range, it remains an attractive option for commercial investors. The surge in CMBS executions in 2024 is largely driven by favorable lending programs and greater availability.
Commercial Banks: Rate Range: 6.00% - 10.50%
Banks have maintained strict underwriting standards in the current interest rate environment, prioritizing established clients and robust deposit relationships. This approach has persisted throughout the first half of 2024. Despite these stringent measures, banks have successfully delivered competitive pricing, offering some of the most favorable rates in the market.
Credit Unions: Rate Range: 6.00% – 10.50%
Credit unions set themselves apart from other lenders by providing borrowers with lower interest rates, making them a compelling choice. However, similar to banks, credit unions often take a cautious approach to lending, with a meticulous underwriting process that can lengthen closing times, particularly in today’s market conditions. While their rates remain highly competitive, borrowers should anticipate possible delays in loan approval and closing due to the thorough nature of their underwriting procedures.
Fannie & Freddie: Rate Range of 5.10% – 8.00%
For commercial residential investors, Fannie Mae and Freddie Mac continue to offer some of the most favorable financing options for residential and multifamily properties. Many buyers are increasingly choosing to lower leverage by voluntarily contributing additional equity to secure better interest rates. This strategy allows them to take advantage of current market conditions and achieve more attractive financing terms for their investments.
FHA: Rate Range: 5.10% - 7.85%
The current interest rate trends for FHA loans in the commercial real estate sector provide borrowers with a strategic opportunity to transition seamlessly from construction or bridge loans. This option is particularly advantageous for those prioritizing financial stability. Opting for FHA loans in a rising interest rate environment enables borrowers to secure long-term financing, enhancing financial predictability while potentially reducing overall costs.
HUD: Rate Range: 5.10% - 8.00%
HUD has emerged as a significant financing option, especially in the latter half of 2023, and has remained a reliable choice for residential 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 flows.
SBA: Rate Range: 7.00% - 10.00%
The Small Business Administration (SBA) has emerged as a valuable resource for both new investors and those seeking lower initial down payments, especially for owner-occupied properties. Additionally, more investors are now exploring a transition from the SBA 7(a) program to the 504 option, particularly for refinancing needs.
Life Company: Rate Range: 6.00% - 10.00%
Through innovative strategies and adaptable asset preferences, LifeCo options offer competitive rates, often in the low 6% range. Recently, LifeCo lenders have noticeably increased their activity, capitalizing on the lending gap created as banks navigate challenges within their commercial portfolios.
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.
