Commercial Real Estate Lending
What has been everyone's preferred lending source on stabilized commercial deals recently? How important has prepayment flexibility been in your decision making?
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Robert's breakdown tracks with what I've been seeing on the borrower side. For stabilized retail and industrial in SoCal, the sub-$5M market is basically community bank or credit union territory right now — exactly as described. The credit unions that pulled back post-2022 are genuinely back and competitive, which has been a welcome shift.
On prepayment flexibility: it's become a primary filter for me, not an afterthought. With NNN leases running 10-15 years, there's a decent chance I'll want to refinance or sell before the loan matures — whether that's triggered by a lease event, a tenant credit change, or just rates moving. Step-down prepay schedules are much easier to work with than yield maintenance, even if the note rate is slightly higher. I've paid the yield maintenance premium once and won't make that trade again.
One thing that doesn't get enough attention at the smaller end: lender appetite for mixed-use or retail-with-residential varies wildly between institutions. Some CUs will touch it readily, others won't look at anything with more than one use. Worth mapping that out early rather than burning 30 days in underwriting before the lender decides your deal doesn't fit their box.