The commercial real estate industry has experienced a significant shift in borrowing conditions in 2024 compared to the post-pandemic period. As we approach the fourth quarter, these circumstances are once again changing. At Connect Texas Multifamily on August 20 at Virgin Hotels Dallas, financing expert Vic Clark from Lument will join other panelists to discuss what this means for owners and investors. In anticipation of his participation in the “Dealmaking Update: Making the Numbers Work” panel, Clark shared some insights.
Q: Are traditional lenders pulling back on lending for multifamily properties as well?
A: It depends on which lender you’re talking about. Pure banks have been scaling back their lending activities for several years now due to pressure to clear their balance sheets and reduce exposure to troubled deals. This trend is seen across most banks, making it difficult for borrowers looking for new loans.
Q: Do you think this trend will continue throughout 2024?
A: Yes, I believe it will remain relatively unchanged until at least mid-2025 when many problem loans may have been resolved or sold off by then.
Q: What would be considered an ideal loan request under current market conditions?
A On the multifamily side of things, a borrower should come with stable collections over three months or more along with steady expenses and finalized tax assessments. They should also obtain insurance quotes from multiple companies due to rising costs in that sector.
Q:Is there anything else that becomes more important during periods of low interest rates?
A Low interest rates can help offset challenges such as lower collections or higher expenses when underwriting deals because they allow borrowers access larger loan amounts without straining debt service coverage ratios too much.
Q:Is there evidence that borrowers are becoming more creative when seeking out loans?
A We work closely with our clients who often return time after time so we try our best offer solutions based on our experience working through hundreds of similar deals. However, we also expect borrowers to come up with their own solutions to bridge any gaps in the financing structure.
Q: Do you have any final comments?
A I anticipate that lenders will be extremely busy for the rest of this year and into next year, so borrowers should be prepared for longer wait times and increased competition for attention from lenders. Don’t miss out on Connect Texas Multifamily tomorrow where you can meet and hear from industry leaders about current trends in multifamily lending! Register online or onsite at Virgin Hotels Dallas.
