Expert Thoughts on Commercial Lending: Keep Calm & Carry On

Construction has come to a temporary halt in Boston and Cambridge, the stock market is bouncing around and the Fed has slashed interest rates in response to the current Coronavirus pandemic. In the face of this current uncertainty, BLDUP reached out to Fergal Woods and Doug Landry, Partners at the capital advisory firm FinanceBoston to get their take on the state of the commercial lending market. In good news, deals are still getting done and Woods & Landry, who have their finger on the pulse of the market, know exactly who's lending where in real-time.

BLDUP: How the COVID-19 pandemic affected deals in the pipeline? Have you closed deals recently and will you still be closing deals as scheduled? 

FinanceBoston: Since the outbreak started, we have closed multiple deals, including two this week. The bank honored their initial terms, which were committed to a couple of weeks ago. Since the crisis really began in earnest about a week ago, we also received two additional commitments, one for a refinance and one for a ground-up construction deal. Banks are still lending, and equity investors are being opportunistic. 

BLDUP: What adjustments have you seen in the market?

FinanceBoston: For brand-new deals that we are just starting to go to market on, we are seeing some banks being a little more conservative and taking a “wait and see” approach. On acquisitions, we are seeking clients to extend out 30-60 days to deal with any unforeseen circumstances, but very much intend to close. So it could be a very busy summer if this creates a backlog and pushes deals slightly of their original timeline.

BLDUP: As we are all aware, the Fed has slashed interest rates, how has this/will this impact commercial lending? 

FinanceBoston: We’ve seen the drop in rates get passed along to the investors, but some banks are increasing margin slightly to offset declines in the index. All-in rates are generally below where they stood a month ago.

BLDUP: Can you share your thoughts on the current market, we have heard some institutions are pausing lending. Is this a major issue or can people still find the money for their projects? How could you help those looking for funding?

FinanceBoston: We are only aware of one lender who has put a moratorium on new money for 90 days; they make a lot of loans to restaurants and are heavily weighted in that sector, which is the most hit by this crisis, at least locally. On new construction deals, we are still seeing interest, as banks are solving for what the world will look like in 18-30 months when the project completes. We have clients who are still putting new deals under agreement, with longer closing periods to account for the uncertainty.

BLDUP: Could this be an opportunity for people to find "deals" with low rates on refi's or purchasing existing assets? 

FinanceBoston: Absolutely! Refinances are most attractive right now.

BLDUP: Can you share your final thoughts on this crisis in the near and long term and what you expect to see in terms of recovery.

FinanceBoston: This is an external risk to the economy (i.e. not caused by supply/demand imbalance, unemployment or anything else); the underlying fundamentals were extremely strong a month ago, and I believe they will come back strong later this Spring as this event is creating a backlog. You can look to Asia to see that they’ve already stabilized after taking drastic measures to contain the virus which are being duplicated in the West now. There will be some lagging effects, but the US has always recovered from any economic downturns. In the short term, we also have access to opportunistic equity, so if banks are more conservative, we can still find a way to bridge the gap to get to the same total dollars.

Contributor Bio

FinanceBoston is a real estate capital and advisory firm whose core business has expanded dramatically in recent years from one primarily built around commercial real estate loans to a business that provides a full suite of real estate capital and advisory services. Founded in 2004, FinanceBoston was out in front of the globalization trend that’s taking place in real estate investing and development. Since inception, the firm has worked with local developers and international investors to develop and acquire real estate.

Today FinanceBoston’s associates work with their clients to customize the best debt, equity, and asset management solutions for their real estate investments and developments. Every engagement is led by a partner in the firm to ensure that firm’s deep understanding of both the capital markets and real estate are leveraged to our client’s advantage. This heavy emphasis on knowledge and experience, the core of FinanceBoston’s competitive advantage, has enabled the firm to deliver the best possible outcomes for its clients over the long term.FinanceBoston is a real estate capital and advisory firm whose core business has expanded dramatically in recent years from one primarily built around commercial real estate loans to a business that provides a full suite of real estate capital and advisory services. Founded in 2004, FinanceBoston was out in front of the globalization trend that’s taking place in real estate investing and development. Since inception, the firm has worked with local developers and international investors to develop and acquire real estate.

Today FinanceBoston’s associates work with their clients to customize the best debt, equity, and asset management solutions for their real estate investments and developments. Every engagement is led by a partner in the firm to ensure that firm’s deep understanding of both the capital markets and real estate are leveraged to our client’s advantage. This heavy emphasis on knowledge and experience, the core of FinanceBoston’s competitive advantage, has enabled the firm to deliver the best possible outcomes for its clients over the long term.

FinanceBoston >>

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