News & Opinions
The latest news and insights from Hanley Wood’s outspoken experts and key thought-leaders throughout the residential and commercial design and construction industry.
Money Talks: Banks Grow More Aggressive on Construction Loans
John Caulfield / MULTIFAMILY EXECUTIVE / June 20, 2013
Builders and developers benefit from rising competition among financing sources.
Banks are more readily opening their wallets again to provide debt financing for multifamily for-sale and rental projects. But some banks still view this space cautiously, as they see competition now coming from an expanding host of non-bank capital sources. Other banks, while eager lenders, nonetheless are watching for signs of overbuilding, particularly on the luxury side of the spectrum, and looking for clues of where rents might be headed.
“We are guardedly optimistic about this product type,” says Jim Reynolds, executive vice president with Texas Capital Bank in Dallas. “There are a lot of lenders in this market, and it’s been the product de jour for the past few years.” At the moment, TCB is considering lending requests only from existing customers in Texas
Wells Fargo, the country’s largest commercial real estate lender, has seen a “dramatic acceleration” in lending competition over the past six months. “Everyone is looking for returns, and the real estate space is a good place to get them,” observes Chip Fedalen, Wells Fargo’s executive vice president and group head of institutional commercial real estate. That competition, however, has not tempered Wells Fargo’s longtime avidity as a lender to multifamily projects, for which it has been “a consistent provider of debt capital,” and, coming out of the housing recession, “a ‘first mover’ in this space,” says Fedalen.
Several commercial banks remain active in this space through the FHA 221(d)(4) program, which insures mortgage loans to facilitate new construction or substantial rehabilitation. This week, for example, Fairfax, Va.-based builder/developer VanMetre Cos. secured a $55.7 million FHA construction loan through M&T Realty Capital Corp. (a subsidiary of M&T Bank) to develop a 315-unit apartment complex in Woodbridge, Va.