Obtaining commercial real estate financing for developments and investments has been challenging in recent years. To gain a better understanding of the current market, questions were posed to Gary Bechtel, CEO of Red Oak Capital Holdings. As a speaker at the upcoming Connect Texas Multifamily 2023 conference , Bechtel discussed changes in CRE funding, growing opportunities for private lending and potential impacts of pending debt maturities.
Real estate financing has been difficult as of late due to soaring inflation and lingering fears of recession coupled with chaos in the banking industry following regional bank collapses that had previously served as key sources for commercial real estate finance capital markets retreating or stopping lending altogether during Q1 2023. This created an opportunity bridge lenders could fill voids by providing investors seeking capital projects with short-term solutions while spreads widened across debt funds, banks and CMBS groups from 200-300 basis points in March 2023 alone; CMBS issuance essentially evaporated during this time period too.
Private debt is becoming an increasingly attractive investment target due to its ability to provide tangible income producing assets at 25%-35% discounts compared valuations which provides margin safety against pricing compression; large amounts are being invested into these types opportunities across strong growth markets where well-capitalized balance sheet lenders have seen their comfort zones expand beyond cautionary conservative underwriting practices thanks largely to volatility within financial markets creating higher returns than other investment classes can offer despite economic uncertainty present today – all factors contributing towards making it a lender’s market currently .
In terms of looming loan maturities expected throughout year ahead traditional lenders will likely retrench while new capital finds home among bridge loans who reserved cash without leverage allowing high quality borrowers access more easily – Trepp reports $60 billion fixed rate loans requiring refinancing soon along Goldman Sachs reporting over $140 billion floating rate CMBS maturing next two years so interest hedges must be extended much higher costs leading delinquencies rise naturally causing everyone bit nervous but overall returns expected exceed those achieved 2019-2022 periods when Fed attention drove down inflation through base rates increases thus providing opportunistic capital .
Connect Texas Multifamily 2023 takes place Aug 22nd Virgin Hotel Dallas – click here more information register today!
