What lies ahead for commercial real estate lending: A conversation with Zalmi Klyne
We recently caught up with Zalmi Klyne, senior vice president and managing director in Northmarq’s Los Angeles office, to discuss challenges and opportunities that exist in today’s commercial real estate (CRE) lending market, with a particular focus on multifamily. Klyne has nine years of experience in the commercial real estate industry as well as in other businesses. His insights and advice have proven invaluable to our clients in and around the Los Angeles metro, and we’re pleased to share part of the conversation below.
Earlier in the year, we saw several high-profile bank failures. How have the CRE debt markets responded since then?
The response by regional banks has been fairly dramatic. Some have halted CRE lending in California altogether. Twelve months ago, we had perhaps 10 to 12 banks aggressively marketing for multifamily loans; now, there are only a few of them left. All the regionals have tightened standards. They almost all require a depository relationship before they will consider making a loan. We’re seeing banks ask for deposits of between 10% and 20% of the loan value, and some are only lending to established, long-term customers. Their focus is on liquidity. Life insurance companies, however, are taking a different approach. They’ve become quite creative in developing flexible prepay structures and unique loan terms in order to attract and win high-quality business.
What is your primary challenge in securing loan approvals for your clients in today’s market?
Without a doubt, it’s been the volatility in interest rates. When we’re trying to price a loan for a developer or investor, and the Treasury market moves 35 or 40 basis points, it changes the metrics of the entire deal. The Federal Reserve is indicating perhaps one more rate hike this year, but coming to an understanding of where this market should be priced is a difficult and time-consuming task. And there’s always the question of when will rates stop going up and start coming down.
To read the entire interview, download the report.
This interview was featured in Western Real Estate Business in October 2023. Copyright 2023.
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Northmarq is a full-service capital markets resource for commercial real estate investors, offering seamless collaboration with top experts in debt, equity, investment sales, loan servicing, and fund management. The company combines industry-leading capabilities with a flexible structure, enabling its national team of experienced professionals to create innovative solutions for clients. Northmarq's solid foundation and entrepreneurial approach have built an annual transaction volume of more than $39 billion and a loan servicing portfolio of more than $76 billion. Through the 2022 acquisition of Stan Johnson Company and Four Pillars Capital Markets, Northmarq established itself as a provider of opportunities across all major asset classes. For more information, visit: www.northmarq.com.