Reading the Tea Leaves: Interest Rates & Real Estate

Introduction

Hi, I'm Allen Kitterman. I am the Commercial Real Estate Leader with Black Diamond Mergers and Acquisitions. Everything I want to talk about today is information I hope that you already know but, if not, it's just something to bring to your attention to have on your radar. I had a bunch of graphs I wanted to talk about but whenever Chairman Powell said that the Fed was wrong and they aren’t sure what's going on and how to control it, I threw those out.

A Period of Transition in Commercial Real Estate

So, that brings us to our topic of interest. We are in a period of transition. The way that commercial real estate has been financed and the way your businesses have been financed is drastically changing. Whenever it's time to refinance your property, things are going to be different. I know that there are a lot of bankers online that will watch this. I’m not trying to do your job, but I think it’s fair to mention that, whenever a client comes in, the term sheets they receive are going to be much different than what they saw previously. They need to understand why the value of property is going down, why the revenue coming from it is not quite as profitable, and what to expect when dealing with inflation. On top of that, there's going to be the added pressure of paying more interest on the capital they need to work and to refinance their property.

Speak to a Lender Early

What we want to do is get the message out that instead of waiting to discuss your refinance, you should start having the conversation with your lender about six months prior. You will have some difficult decisions to make, and you'll have some adjustments to make throughout the process. You will have to think about what you want to do with your property and the more you know about our current economic situation, the easier it will be to make a good decision.

A Message from Black Diamond

From Black Diamond’s Commercial Real Estate Division, we want you to know that we are here to help. We want to take the time to speak with you in order to understand your current position and help you prepare a strategy to face this time of transition. The old saying goes, “it’s never as bad as it seems or as good as it seems.” So, we want to keep you in the loop. We want to make sure that everything is done to maximize the value of your property so you can protect the generational wealth that you have created for your family. Thank you for taking the time to read our message!