Commercial Real Estate Financing State of the Market | May 2024
Terrydale Capital
May 6, 2024 9 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: 7.00% - 14.75%
Private money lending continues to hold sway as an attractive option for expediting transactions in 2024. 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. Borrowers should anticipate higher rates pertaining to hard money options at the tradeoff of sub 14-day closings.
Debt Funds & Bridge Lenders: Rate Range: 6.90% – 11.50%
As we progress through 2024, there has been a noticeable change in the source of executions within the realm of debt funds compared to the previous year. In 2023, the predominant mode of execution stemmed from bank and credit union options; however, in 2024, there has been a considerable shift towards debt funds emerging as our primary financial executors. These financial tools hold considerable allure for individuals aiming to mitigate risk and pursue financial expansion, thanks to their inherent benefits and adaptable short-term nature.
CMBS: Rate Range: 6.50% - 10.95%
The sustained enthusiasm for Commercial Mortgage-Backed Securities (CMBS) shows no signs of waning, driven by the promise of lower interest rates when compared to other financing avenues. With available options presenting rates in the low-6% range, CMBS stands as a compelling choice for commercial investors. Recently, there has been a significant surge in CMBS executions, attributable to favorable programs and increased availability.
Commercial Banks: Rate Range: 6.00% - 13.00%
Banks continue to uphold rigorous underwriting procedures in the face of a higher interest rate market, placing emphasis on the importance of established clients and depositary relationships. While this trend persists into the initial months of 2024, banks have also managed to provide competitive pricing, yielding some of the most favorable rates currently accessible in the market.
Credit Unions: Rate Range: 6.13% – 10.25%
Credit unions stand out among other lenders by providing borrowers with the benefit of lower interest rates, making them an appealing option. It's worth noting that credit unions, like banks, usually follow a meticulous lending approach, which entails a thorough underwriting process that could lead to extended closing times, especially considering the current market conditions. While credit unions offer competitive rates, borrowers should expect potential delays in loan approval and closing due to the comprehensive nature of their underwriting procedures.
Fannie & Freddie: Rate Range of 5.80% – 7.50%
Fannie Mae and Freddie Mac transactions continue to showcase resilience, underscoring their stability in the market. These transactions are consistently recognized as among the most advantageous options for residential and multifamily properties. More and more, buyers are choosing to reduce leverage by injecting additional equity willingly, aiming to secure more favorable interest rates. Embracing this strategic approach allows them to capitalize on current market conditions and attain better financing terms for their investments.
FHA: Rate Range: 5.65% - 7.85%
The prevailing interest rate trend regarding FHA loans in the commercial real estate sector offers borrowers a valuable chance to seamlessly transition from construction and bridge loans. This transition can prove especially advantageous for those aiming for financial stability. Opting for FHA loans in a rising interest rate environment enables borrowers to tap into long-term financing solutions, providing heightened stability and potentially reducing overall expenses.
HUD: Rate Range: 5.50% - 8.00%
HUD has gained prominence as a significant financing option, particularly in the latter half of 2023, and it is poised to continue serving as a dependable vehicle for investors in 2024. With notable Loan-to-Value ratios of 90% for acquisitions and 80% for refinances, alongside 35-year fully amortizing, non-recourse loans, HUD emerges as an ideal choice for various scenarios. Whether it involves new builds, later vintages, multifamily properties, or long-term holds, HUD financing excels at optimizing cash flows.
SBA: Rate Range: 6.90% - 10.00%
The Small Business Administration (SBA) has emerged as a valuable option for both novice investors and those seeking lower initial down payments. This choice has proven advantageous, particularly for owner-occupied properties. Additionally, there is a growing trend among investors to contemplate transitioning from the SBA 7(a) program to the 504 option, especially for refinancing purposes.
Life Company: Rate Range: 6.25% - 10.00%
By leveraging creative strategies and maintaining flexible asset preferences, LifeCo options can offer competitive rates in the low 7s. They actively lend on all asset classes. Call us to learn more.
Mezzanine and Gap Financing:
In today’s market, there are many options available for structuring deals, and Mezzanine and Equity financing enable our clients to pursue larger projects and even fill the funding gaps that may be necessary on some projects. We have seen a jump in gap financing needs as of late with more investors needing to fill the space between their funds and lenders, in many cases, to remain liquid. Our Mezzanine connections are able to oblige, but they require $2MM minimums in order for certain deals to make sense.
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.
