Discussing Lending Solutions At Bisnow’s Sept. 30 NYC National Finance Conference

To finance commercial real estate projects under current market conditions, many investors have been seeking creative solutions. This has enabled private lenders, such as real estate private equity lender and developer Clifton Blake, to fill in gaps ordinarily filled by banks and traditional lending sources

“Being a lender based in the U.S. and Canada, with investment partners throughout the globe, means we can price and underwrite differently, be a little more creative on deals and look into a wide range of asset classes,” said Clifton Blake Asset Management and CB South Capital partner and Head of Americas Brian Murray. “We have deep lending expertise and we have our own private capital and proprietary raised funds, so we can be really creative.”

Murray will dive into deal structuring, underwriting and more at Bisnow's National Commercial Real Estate Finance Conference in New York City on Sept. 30. He will participate on the Evolving Capital Stack: How To Structure Deals And Quantify Returns panel.

Click here to register and purchase tickets.

Bisnow connected with Murray to discuss today’s lending challenges and Clifton Blake’s approaches to lending.

Bisnow: How is today’s economic climate impacting commercial real estate deal-making?

Murray: We’re lending in this environment of higher interest rates and economic uncertainty, and everybody's discussing rates hopefully coming down in the next couple of quarters. Many existing lenders continue to extend the loans that are not meeting loan covenants or underwriting guidelines, hoping borrowers will be able to exit a deal or refinance in the coming quarters. Monitoring interest rates during this cycle is important for our borrowers, as new deals could pencil out with changing costs of capital. 

On the debt maturity side, we are monitoring comps, including asset sales, loan sales and new valuations, from third parties to determine where rents, cap rates and occupancy levels are trending in key markets. These are critical data points for us during the underwriting process as a private lender.

Insurance for existing properties and development sites in flood zones such as South Florida, Texas, New York and New Jersey has been a big challenge for bank lenders meeting compliance, but we view this as an opportunity for us because we know the challenges and requirements well. Before lending on a deal, for instance, we will work with the developer and/or owner, have key construction policies in place and ensure that the development plan includes flood risk measures.

As a private equity lender and developer, Clifton Blake’s team and partners have worked through a number of real estate cycles in both the U.S. and Canada. We view these challenges as an opportunity to work with borrowers tapping into our experience. Clifton Blake has raised seven funds, a private REIT and a mortgage fund with zero loan losses since launching 12 years ago in Toronto.

Bisnow: What are some of the challenges in lending for the multifamily and hotel markets?

Murray: Multifamily would usually be going to traditional capital sources, but there's distress because of the changes in capital markets. Unfortunately, a lot of owners and equity investors that acquired assets between 2021 and 2023 in the U.S. either overpaid or they had a business plan with rent escalations and capital expenditures that aren’t coming to fruition or now don't meet their lenders’ loan covenants.

We are seeing some borrowers and developers in multifamily getting hurt right now throughout the country and are starting to see a lot more of those deals in the market as loan sales, whether distressed, subperforming and performing, private rescue capital requests, and development deals that no longer meet return expectations for investors and lender guidelines.

This is the same with hotel deals, and particularly limited-service hotel deals with property improvement plans and the nonluxury boutique hotels. The capital has gone away from hotels for some time now, so we have been receiving a number of loan requests with experienced operators, franchisers and management companies. Hotels are also challenging as a daily operating play, with changing occupancy and rates as opposed to other asset classes with longer-term fixed leases. We know this business well, so from experience we continue to monitor key metrics like revenue per available room, average daily rate, PIPs and new hotel construction coming online to assist us with underwriting new opportunities. 

These asset classes fit our loan criteria, especially if the larger private lenders and regional banks aren’t looking at the deals. We are getting a good window into not only the economics of structuring, but where these types of assets are performing or nonperforming geographically. And we expect to continue to see hotel financing challenges as an opportunity to assist borrowers at our company.  

Bisnow: How can buyers get creative with different capital sources?

Murray: We are talking with borrowers, investors and developers about creative solutions, including senior and subordinate bridge financing throughout the U.S. A key component is working with borrowers to confirm available equity in the deal and any other gaps that may be in the capital stack. One of Clifton Blake’s key advantages is our cross-border, U.S. to Canada, relationships with investors and other lenders up and down the capital stack to structure deals. We can use A/B notes with lending partners. We also just closed another $100M warehouse lending facility with one of our largest bank partners. This is a key example of larger financial institutions that support our company.

The global relationships are huge because if we have a deal that doesn't fit exactly into our bucket, we can look to structure it with other partners. We can adjust interest rates or advance amounts or other loan covenants by bringing in other capital partners. When we structure a loan, we can approach rates on a creative basis and have a view from both sides of the table, as real estate developers and owners.

Bisnow: How does Clifton Blake help clients find the best capital solution?

Murray: We have built an infrastructure for lending that benefits and fully supports our borrowers. We have our lending businesses: CB South Capital in the U.S. and Clifton Blake Mortgage Fund in Canada, which has full loan underwriting capabilities and teams located in Toronto, New York and South Florida. We also have our Clifton Blake Private REIT, a best-in-class developer in Toronto, and CB Wilkinson, our in-house innovative construction management company. All of these resources work together and are fully available to assist our clients with the best strategy and capital solutions.

Click here to learn more about Bisnow’s National Commercial Real Estate Finance Conference on Sept. 30.

This article was produced in collaboration between Studio B and Clifton Blake. Bisnow’s editorial staff was not involved in its creation.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.