On September 21, 2022, the Federal Reserve (Fed) raised rates for another 75 bps, the fifth rate hike this year. According to the Fed’s September economic projections, the Federal Open Market Committee (FOMC) policy makers suggested that 2022 will end in the 4% to 4.5% range.
To help navigate the rate environment and overall economic landscape, we put forward three strategies for multifamily borrowers to consider.
1. Take a holistic approach to your portfolio
Despite the fact that the deals will not be as straight forward as a typical LTV play, there are many creative solutions lenders can do to deliver for commercial real estate borrowers. For commercial real estate owners who have a stable portfolio, we recommend talking to your lender about your entire portfolio. It may make sense to package properties together to structure a better deal and help manage overall portfolio risk.
For example, Piermont worked with a family office that owns eight stabilized mixed-use and multifamily properties in Brooklyn and the Bronx. We carved out four of the assets, paid off the existing lenders, and packaged the assets into a portfolio loan. However, we structured it with collateral release provision, so the client has the flexibility with each asset. We work with the client to ensure the appropriate leverage and cashflow and flexibility are aligned with the client’s needs.
2. Financing a single asset with global cash flow
Taking a holistic approach means not underwriting on a transaction basis, but the borrowers’ overall financial strength. The profile of clients with loan amounts between $1 million to $10 million looks very different from the large developers and owners. Some may have other core businesses and became property owners out of necessity or as an investment vehicle. Leverage your other business assets to offset perceived risks associated with a decrease in appraised value.
In another example, Piermont is working with a client, who is facing maturity from their existing lender. Taking a single asset stance, the existing lender is concerned with the value of the asset and offered the client a short-term, 90-day extension- but expect to be repaid. Piermont took a relationship approach, giving credit to the appraisal and lending off this value, but giving the client additional support by the overall cash flow that can be used to service the debt structure. This gives our client the relief of a refinance, while Piermont has the support of the client’s global cash flow. As a bank who specializes in serving small and medium-sized companies, we’ve learned having a holistic approach allows us to better assess client’s financial strength and come up with a creative solution for their financing need.
3. Right-sizing your bank partner
Entrepreneurs, developers, investors, and multi-generation family-owned businesses have been looking for a bank that can act fast and deliver solutions. Often overlooked by large banks and regional lenders, these clients have been frustrated by wrong-sizing – using a bank that’s too big for their needs – and challenged by smaller banks with limited options.
Once you have set yourself up for the best assessment of your financial strength as a borrower, it is time to look for right-sized solutions for your financing need.
Since its inception in 2019, Piermont has provided a digitally enabled, human-delivered alternative for borrowers. Armed with a pristine portfolio and a strong capital position to lend, Piermont has stepped up its support for commercial real estate owners and operators looking to access financing for multi-family properties. Our team has successfully helped countless clients completing new financings.
For any financing needs, Piermont can give you a high-level quote within 24 hours and we rate lock for 60 days after a term sheet is executed. We stand by our terms and never re-trade our customers.