As a tsunami of loan maturities barrels down on the commercial real estate sector (Approximately $162 Billion in 2023 alone), lenders have a message for borrowers. Relationships matter again!

The point got drilled home repeatedly at the recent IMN Winter Forum on Real Estate Opportunity & Private Fund Investing Conference. “When capital gets scarce it’s going to go to those people that are known by the capital providers” said, Michael Klein, CEO of Freedom Financial Funds.

For borrowers that haven’t done a great job cultivating their lender relationships during the past few years, it will be especially important to align themselves with capital markets advisors or commercial mortgage brokers who have extensive networks and understand how to navigate these uncertain financial times. “The lending community is going to feel frigid to a lot of operators, especially when they are less of a known commodity. If you are going to lend in this environment, you want the comfort of knowing that your borrower is not only competent and well-capitalized, but transparent and deeply committed to the success of their property. We’re regularly engaging with close lender relationships to ensure that our clients’ projects get prioritized”, said Vernon Beckford, CEO of Diversified Lending Solutions.

One interesting dynamic in this current economic climate: In contrast to the Great Recession, there is still plenty of capital available. Lenders are just not quick to deploy it, for fear of eroding economic fundamentals and uncertainty around forward interest rates and cap rates. Jake Lehmkuhl of California Bank & Trust, summed it up simply, stating “there’s plenty of capital. It’s just not moving”.
The lack of transparency around what motivates lenders can be hugely frustrating to borrowers. And what was abundantly clear from the conference is that those motivations vary depending on what type of lender it is.