As real estate transaction volume gradually returns, underwriting standards have tightened and return thresholds have reset. At the Texas Multifamily 2026 in-person event set for August 13 in Dallas, a panel of lending experts will provide conference attendees with insiders’ perspectives on how deals get done in the current environment. Nick Jans, CCIM – Regional Director, Central U.S. – Red Oak Capital Holdings, will be among the “Capital Is Back, But on What Terms?” speakers, and provides a preview of the discussion here.
Q: Have borrower requirements and borrower awareness changed from a year ago?
A: Most borrowers now realize there is unlikely to be a coming dramatic drop in the interest rate environment. Some sources in the market say what’s transacting are only those deals that MUST, but that’s too restrictive a comment. Sponsors are aware of the current rate environment, be they in the hunt for perm, bridge, CMBS, agency, or what have you. Whether this is a “change” from a year ago or not, borrowers’ refinance requirement, if they can get it, is the cash neutral execution. Non-recourse remains a must for the preponderance of sponsors, even in bridge, which is exclusively what Red Oak looks for.
Q: There are more lending sources in the market, but has underwriting gotten any less stringent?
A: You’d probably have to look far and deep to find aggressive underwriting on non-market terms, but I’m thinking it’s out there. There are lenders who “need” to put dollars out, like there are equity teams who need to deploy capital. Do they wait for the least risky play or do they choose to cut one corner not typically cut? If anything, I think underwriting has gotten more stringent. It’s no less stringent at our shop – and we compete in the riskier space of the business. In doing so, we MUST retain our stringency. I read a piece recently talking about how big bank lending was noticeably up year over year, but without sacrificing underwriting fundamentals, and there were a few reasons for this.
Q: Are there lending situations that you and your team will rule out due to the level of risk, or are you usually able to find a way to make a deal work?
A: Red Oak does pride itself on its creative approaches to get to closing, and we’ll do what we can, reasonably, to get there. When you do, there’s a chance you create a loyal client. We will listen to any sponsor’s “story,” when there is one, to make sure we understand the circumstances leading up to the story. But as we say as we start any analysis, tell us the truth, the whole truth, and nothing but the ruth. When we find this to NOT be the case, intentionally NOT the case, it’s pencils down. This has been real world at Red Oak.
Q: What are the chief selling points for winning a borrower’s business? Have these changed as the lending arena has gotten more crowded?
A: In no particular order, I’d mention that in every transaction we look at, we ask about a borrower’s track record, maybe a handful of other lenders that borrower has borrowed from. I think a borrower, let ‘s assume in a first transaction with us, will ask us the same: recent closings, track record.
I think relationships still carry some weight too. There’s an old saying, “we prefer to deal with those we tend to like.” Not always, but let’s say my proceeds are well below, or my spread or fees are well above, a legitimate competitor’s. It’s not going to matter how much a borrower, or deal source likes me; I’m a good bet to lose that deal. Every borrower, and broker as the case may be, stresses surety of closing, certainty of execution. But in a first deal, how does a lender know what level of timely cooperation it will get from the not yet known sponsor? The sponsor doesn’t know how fast, or slow moving, the new lender will be.
We like to introduce the respective teams to one another early in our process, once we see a viable deal and one where we can compete. We have senior managers, up to and including the CCO and CEO, who will get on calls with a sponsor and broker, applicable, to address any key issues, maybe a past bankruptcy or other credit event, and to hopefully get the borrower additionally comfortable with the lender team as well as the personalities who will have a vote at investment committee, should the loan get that far. This has helped us win a borrower’s confidence, and its business.
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