Despite recent bank closures, Chair Jerome Powell declared that the banking system was “sound and resilient” and that conditions have broadly improved since early March when regulators first identified three large, troubled banks. Silicon Valley Bank and Signature Bank were closed by regulators in March and, Powell said, the sale of First Republic to JPMorgan Chase on May 1 “is an important step toward drawing a line on that period of severe stress.” In all cases, the depositors were protected.

Deals Still Getting Done

Senior Director of Capital Services Matt Swerdlow said it was encouraging to hear Chair Powell’s positive remarks about the resiliency of the banking system and that the problems first identified in March have been resolved, which should provide much needed relief to the smaller institutions.

“Signature and First Republic have exited the market, but we are still working with a number of banks that are willing to lend money and do deals,” Swerdlow said. “Historically less competitive banks have been finding themselves in the mix and are now taking market share.”

He noted that in these volatile times Ariel’s Capital Services team is still successfully arranging bank loans for a number of properties with vacancies. These include securing $13.5 million in acquisition financing for three adjacent free market mixed-use buildings that were over 40% vacant at close. The transaction closed 35 days after signing the term sheet and the loan featured a five-year term with an interest rate fixed at 6.5%, which was locked at the signing of the term sheet with two years of interest only.

“It's also important to note that we also have relationships with many agency lenders that are targeting multifamily and affordable loans,” Swerdlow said. “These lenders are extremely liquid and are not dependent on depository relationships.”

What Borrowers Should Look For

Swerdlow said in this environment it’s important to ignore the fear-based headlines and instead speak with an advisor who can run a process with multiple lenders, identify the best source of capital for a particular asset, negotiate attractive terms and close quickly to take advantage of competitive rates.