CRE lenders that offer non-recourse loans are favored by most developers according to a new survey.
Commercial property loan insurer LGIS Group commissioned The Harris Poll to survey more than 350 US commercial real estate developers to gain insight into the business strategy of CRE developers and how financial institutions can better meet their needs to gain a competitive advantage.
It found high levels of liquidity in the industry which increases competition among lenders including fintechs and alternative lenders.
“For decades, banks’ chief credit officers have relied on traditional methodologies for CRE lending and it has stifled innovation in the industry,” said David Eichenblatt, President and Founder of LGIS Group. “New entrants into the market have recognized this and are now exploiting it to gain market share on those very same bankers.”
Four in five developers said they would be more likely to work with lenders that offer non-recourse loans than those that do not. And asked if they would be more or less likely to invest additional money into a project to resolve a development issue if the original CRE loan funding the project had no personal guarantee repayment requirements, 58% said they would be more likely to do so.
The findings of the reflect commercial real estate developers’ openness to exploring other options when seeking funding for their projects.
“For financial institutions that want to grow their CRE portfolios, they will need to look beyond a process that has been in place since the time of the Medici to free up additional capital or they risk losing valuable ground in a hypercompetitive business environment,” added Eichenblatt.
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