april Insights Newsletter
The market is shifting, and investors who move early are gaining the edge. In this issue, we’re breaking down two must-know trends: the lingering fallout from the Silicon Valley Bank collapse, and three costly mistakes multifamily investors are still making.
We’re also sharing how smart use of bridge financing is helping investors overcome tighter lending conditions, rising insurance costs, and tough rent control headwinds in California.
Silicon Valley Bank Collapse: Two Years Later
The Fallout, the Debt, and the Unanswered Question: How Much Longer Can This Last?
Two years after the collapse of Silicon Valley Bank and First Republic, the shockwaves are still reverberating, especially for regional banks with heavy commercial real estate (CRE) exposure. Over $1.6 trillion in CRE debt is set to mature in 2025 and 2026, and the pressure is mounting.
A Ticking Time Bomb of Debt
According to Parkview Financials' Chief Credit Officer Ted Jung and CEO Paul Rahimian, nearly 60% of smaller regional banks have CRE-to-equity ratios above 300% with almost a third exceeding 400%.
This level of exposure isn’t just risky, it’s destabilizing. It limits liquidity, chokes off new lending, and invites stricter regulatory scrutiny. And in this environment, that scrutiny isn’t just likely, it’s imminent.
Regulators Are Paying Attention
Regional banks now hold over 70% of the nation’s maturing CRE debt. As regulators raise alarms, lending pipelines are narrowing. Banks are stuck: issue new loans and increase risk, or pull back and watch their balance sheets stagnate.
Private lenders are stepping in, but at a premium. Borrowers now face higher rates, tighter terms, and fewer options.
The Growing Threat of Default
Defaults are no longer hypothetical. Rising interest rates and plunging office values are putting severe stress on regional bank portfolios.
“We’re still seeing red flags,” notes Dillon Freeman, Senior Commercial Loan Officer at Fidelity Bancorp Funding. “Unrealized losses and mismatched loan durations remain a major concern. SOFR trending downward could help or hurt, depending on how each portfolio is structured.”
California: Ground Zero
In California, challenges are magnified. Rent control reduces income, insurance costs are skyrocketing, and many properties, despite strong fundamentals, are unable to refinance.
As one developer put it: “So far, the banks have helped by kicking the can down the road. But can it continue?”
A Market at a Crossroads
Two years on, the cracks haven’t healed, they’ve widened. With the CRE debt wall looming, regional banks are running out of time, tools, and regulatory grace.
The market may soon be forced to reckon with overleveraged assets, inflated valuations, and systemic fragility. The next chapter is unwritten—but if the current trajectory holds, the ending may already be in sight.
Investor Insights
Multifamily Investors: Stop Making These 3 Costly Mistakes
At Fidelity Bancorp Funding, we see a high volume of multifamily deal flow. And in that stream of transactions, we keep spotting the same costly underwriting errors, mistakes that can sink an otherwise promising investment. Here are the top three:
1: Unrealistic Operating Expense Assumptions
A sub-30% expense ratio? It’s not going to fly. Lenders and appraisers rarely accept anything below 30%, and assuming otherwise will throw off both your pricing and financing. If your numbers don’t reflect today’s underwriting realities, your deal could collapse before it even closes.
2: Ignoring Vacancy Factor
Even stabilized or new-build assets require a minimum vacancy factor, usually around 5%, to account for tenant turnover and market volatility. Skip it, and your NOI will be inflated, leading to lower loan proceeds and valuation issues.
3: No Margin for Error
Too many business plans assume best-case scenarios: full lease-up, rent growth, low expenses, and easy refis. But if any variable misses, even slightly, you could face a shortfall or worse, a capital call. That’s a quick way to lose investor trust and tank your IRR.
In the era of cheap money, these missteps were easy to overlook. Not anymore.
If you’ve got a pending rate reset or looming loan maturity, now is the time to get proactive. Let’s talk strategies that protect your equity and your upside.
Loan of the Month
Congratulations to Tara Sauerbrey on another successful bridge loan closing. Tara arranged a $1.3 million bridge loan for the acquisition of this 10-unit multifamily property in Los Angeles, CA. With a tight timeline of under 30 days, the team delivered a quick close with higher loan proceeds than competing offers. The financing provided the investor the capital needed to confidently execute their investment strategy.
