Lenders stick to wait-and-see stance after latest Fed rate hike

Real Estate Capital USA

August 2, 2022

The Federal Reserve’s well-publicized program of interest rate hikes – including a move Wednesday to implement another 75 basis point increase – have created more challenges for commercial real estate debt markets participants in the last three to five months more than anything else happening across the landscape.

Carl Chang, chairman of the Federal Reserve Bank of San Francisco’s Los Angeles branch board and founder of Santa Margarita, California-based Kairos Investment Management, said that while expected, the rate increases have led many lenders to hit pause.

“Everybody is being cautious especially balance sheet lenders, because of the market uncertainty and so most are taking a defensive posture,” Change said. “We have several large banking relationships and they’re only considering new loans with their tier one borrowers, not considering doing any new business at the moment.”

Chang said preparations for future rate hikes will resolve around refinancing, pricing adjustments and sector rebalancing. In scenarios where there may be debt maturity issues on a given asset or portfolio, he said lenders and borrowers have to get in front of it now given the difficulty and cash required to refinance.



* The information contained herein is for general, informational purposes only and is not intended to constitute an offer to sell or buy any securities or other assets or promise to undertake or solicit business, and may not be relied upon in connection with any offer or sale of securities or other assets.

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