HOUSTON – Lenders have put a halt on funding new multifamily and office construction projects in Houston in the face of low oil prices, says John Fenoglio, one of the nation’s most experienced real estate lending experts.
“There’s been a curtailment of development capital – equity and debt,” John Fenoglio said at the CBRE press luncheon in Houston last week. “We think development is really going to slow down.”
Fenoglio is founder and former CEO of Holliday Fenoglio Fowler (HFF), the nation’s largest commercial mortgage banking firm. He currently is executive vice president in CBRE’s Debt & Structured Finance Group in Houston.
Other commercial real estate lending remains active, but financing for building new spec office and multifamily projects has been cut off following robust construction in two sectors. (Houston leads the nation in office construction, with 17 million square feet in progress — and more than 25,000 new apartment units are in the pipeline.)
Money is available for constructing retail and industrial projects and funding for other commercial real estate transactions, including refinancings, can be obtained, said Fenoglio, who has been involved in financing hundreds of Houston commercial real estate deals for decades.
On the positive side, interest rates are low and lenders with CMBS (commercial mortgage backed securities) and debt funds are still high on Houston.
With oil prices free-falling from more than $100 a barrel last summer to less than $50 by January, lenders are indeed looking askance at Houston, even the lenders who are still funding deals.
“I’m getting a lot of questions, don’t get me wrong,” Fenoglio said. But for the right deal, the money is there.
What about financing for new single family home development? Do you think that will be affected as much as multi-family and office lending?