Commercial Real Estate Financing State of the Market | October 2024
Terrydale Capital
Oct 1, 2024 8 Min read
Terrydale Capital is committed to offering a comprehensive array of financial services tailored to the diverse needs of our clients. We emphasize staying updated with the evolving market landscape through ongoing discussions with our network of capital market specialists. As the Fed lowers rates and rumors of further rate cuts coming at the end of the year or early Q1 2025, lending avenues continue to open up for investors to take advantage of.
Private Money: Rate Range: 9.00% - 15.00%
Private money lending continues to be an appealing option for accelerating transactions. Its inherent advantages and flexible short-term terms make it a valuable resource in today’s financial landscape, even with the possibility of higher rates and broader interest spreads. While borrowers can anticipate higher costs with hard money loans, the ability to close deals in as little as 14 days offers a significant benefit.
Debt Funds & Bridge Lenders: Rate Range: 5.55% – 10.50%
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 dominant sources. However, in 2024, debt funds have become the leading financial executors. These tools are especially appealing to those seeking to minimize risk and pursue financial growth, thanks to their inherent benefits and flexible short-term structures.
CMBS: Rate Range: 6.30% - 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 recent surge in CMBS executions is largely driven by favorable lending programs and greater availability.
Commercial Banks: Rate Range: 6.05% - 10.50%
Banks continue to uphold strict underwriting standards in today’s high-interest rate environment, focusing on established clients and strong deposit relationships. This trend has remained consistent through the first half of 2024. Despite these rigorous measures, banks have managed to provide competitive pricing, offering some of the most attractive rates available in the market.
Credit Unions: Rate Range: 6.00% – 10.50%
Credit unions distinguish themselves from other lenders by offering borrowers lower interest rates, making them an attractive option. However, like banks, credit unions typically adopt a careful lending approach, involving a detailed underwriting process that can extend closing times, especially given current market conditions. While their rates are competitive, borrowers should be prepared for potential delays in loan approval and closing due to the thoroughness of their underwriting procedures.
Fannie & Freddie: Rate Range of 5.10% – 8.00%
For investors in the commercial residential sector, Fannie Mae and Freddie Mac financing options are consistently seen as some of the most beneficial for residential and multifamily properties. More buyers are now choosing to lower leverage by voluntarily injecting additional equity to secure more favorable interest rates. This strategy allows them to take advantage of current market conditions and achieve better financing terms for their investments.
FHA: Rate Range: 5.10% - 7.85%
The prevailing interest rate trend for FHA loans in the commercial real estate sector offers borrowers a valuable opportunity to smoothly transition from construction and bridge loans. This can be especially beneficial for those seeking financial stability. Choosing FHA loans in a rising interest rate environment allows borrowers to access long-term financing solutions, enhancing stability and potentially lowering overall expenses.
HUD: Rate Range: 5.15% - 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 flows.
SBA: Rate Range: 7.50% - 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: 6.00% - 10.00%
With the use of creative strategies and flexible asset preferences, LifeCo options can provide competitive rates in the low 7s. We 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.
