The health crisis now underway in the United States is making it increasingly difficult to secure financing for commercial real estate investors. The biggest problem, according to an article in Bisnow, is getting financing for the construction of new projects. With the potential causes of uncertainty rising daily, it’s becoming more expensive to borrow and credit standards are getting ever-stricter. The result, reports Bisnow, is that numerous deals are falling apart and that discussions on many planned new ones aren’t even being held. It quotes Patrick Minea, an executive vice president at NorthMarq, as saying it’s unclear whether some of these deals will ever go forward. “Buyers might pull out because they aren’t comfortable anymore. Sometimes buyers are getting new financing terms that don’t allow them to adequately close the deal because they need more equity or whatever or their lenders are pulling out altogether.” Although banks are concerned about their reputation and don’t want to be seen “abandoning” their clients, it’s not uncommon to see financing being offered at 150 bps more than they would have been a couple months ago. Another strategy, writes Bisnow, is putting their clients in a “holding pattern” as they try to work out if the economic winds are right.
