Key Takeaways from Western States CREF '24

Our producers were present last week at the 2024 Western States CREF Conference in Las Vegas with many of the nation's major commercial real estate lenders. Meeting with our lenders provided our producers with key insights into the current commercial real estate financing market.

Continue reading below for our top takeaways from this event:

Both PSRS and our lenders are seeing an increase in deal flow with rates dropping significantly over the past three months.

With the treasury bouncing around significantly last month, they were slow to react to the lower rates. Now that they have settled, their spreads are adjusting accordingly.

While many are having better years than 2023, several of our middle market Life Cos are just a step off their target allocations. They’re looking for quality deals where they can put out large chunks of money for a single deal, this is especially true for industrial and multifamily in our West Coast markets.

The expected rate cut from the Federal Reserve may bring some optimism and transaction volume back into the investment sales space. As such, we will be seeing more financing opportunities in the purchase/sale market.

Bridge Lenders are currently very active.

Construction financing is available with LTC from 60%-75% and rates from 300 bps to 550 bps over SOFR.

It is important to start conversations early for refi's. Many mortgage bankers are seeing the “wall of maturities” coming.

The demand for short-term, 3-, 5- and 7-year, loans remains high and the majority of lenders have funds available. The yield curve is close to uninverting, meaning we’re starting to see short-term loans price below long-term loans again for the first time since mid-2022. Prepayment flexibility also remains in high demand, and lenders are charging up for it. For a 10-25bps addition to your spread, you can get a step-down prepay in years 3/4/5 or as aggressive as a 1% prepay penalty after year one.

Creativity for mortgage bankers and lenders has been an important part of financing in 2024.

Lenders are expecting to close out 2024 strong and are starting to look at their 2025 allocations.

Kostas Kavayiotidis and Matthew Farzinpour of PSRS arranged the $3.65 million refinance of an industrial property in Mesa, Arizona. The subject property is a 44,000-square-foot industrial business park comprised of two grade-level, light warehouse buildings built in 1984 and renovated in 2002. The warehouses have clear ceiling heights of 12 and 16 feet. Financed with one of our correspondent life insurance companies, PSRS provided its borrower with a non-recourse, 10-year loan term, 30-year amortization, and five years of interest only.

Michael Warner of PSRS arranged the $3.5 million construction financing of a ground-up, single-tenant Starbucks in Perris, CA developed by an affiliate of Southern California-based The Lynch Group Inc. The 2,200-square-foot Starbucks and two-lane drive-thru will anchor the retail component of the new Ramona Gateway Commerce Center adjacent to I-215 at Ramona Expressway, which includes new industrial space of approximately 950,000 square feet and additional retail. Financed with Los Angeles-based West Bay Capital, PSRS provided its borrower a non-recourse construction loan with an interest-only, 89% LTC, and 67% LTV 15-month term.