Commercial Real Estate Loans – Interesting Developments

By | May 9, 2023

With change comes opportunity. We are seeing many, very interesting developments with commercial real estate loans. One happens to be banks offering to reduce balances owed and waive any prepayment penalties in an effort to entice strong borrowers to refinance their debt.And no, we are not referring to borrowers that are late, have negative trends, etc. We are talking about stable commercial real estate loans, that the existing bank needs out of, for their own internal issues. I.e. the bank needs liquidity to survive. They have their own capital problems and, apparently freeing up commercial loans is a potential solution.Commercial Real Estate LoansFor example, a hotel client of ours called this week. They owe $3.5 million with a property value at approximately $5.2 million. Their occupancy is great at 84% year end and they have strong cash flow which easily services the existing debt. Their existing bank has offered to waive the existing 3% prepayment penalty and reduce their balance by $300,000 to get them to “go away”. The bank called them out of the blue. Fluke??? Another borrower called us this week as well that happens to own 14 Kentucky Fried Chickens. They owe their existing bank over $7 million and where offered a reduction of $3,000,000 dollars…Again the borrower is strong, cash flowing, etc. These by the way are not the same banks. Borrowers that are in good financial position may want to make a few phone calls to see if they can save a substantially amount of money. Borrowers should keep in mind that just because your existing bank maybe in trouble doesn’t mean that you can’t find a healthy bank, as we and some of our competition continue to grind out commercial real estate loans. As the old saying goes, “got lemons? make lemonade” comes to mind.