By Kurt Ursich
In September 2024, the Federal Reserve reduced interest rates, signaling a strategic pivot aimed at stimulating economic growth in a period of uncertain economic conditions. This reduction is expected to significantly impact the bridge lending market, a sector heavily reliant on flexible and quick financing solutions. For bridge lenders, the Fed’s decision offers both challenges and opportunities, with effects rippling across commercial real estate, residential markets, and private lending institutions like Juniper Capital.
Bridge Lending: A Market in Flux
The reduction in interest rates is a double-edged sword for bridge lenders. On the one hand, lower borrowing costs present an opportunity for developers and investors to access cheaper financing, potentially reviving stalled projects and expanding the pipeline for new developments. However, the broader economic conditions, including a cooling real estate market and rising risks in certain asset classes, complicate the outlook for many bridge lenders.
Recent reports indicate that the bridge lending market is experiencing turbulence, with a new wave of players offering aggressive terms—up to 90% loan-to-cost financing. This heightened competition, coupled with reduced demand from the residential sector, is squeezing margins for traditional lenders. Some bridge lenders are struggling to fund deals, while others are finding it difficult to offload existing loans, creating a backlog of distressed notes.
Private lenders specializing in real estate financing stand to benefit from the recent interest rate cuts
With interest rates coming down, the potential for increased refinancing activity could offer some relief to bridge lenders, providing them with an opportunity to rework deals that were previously unviable at higher rates. However, much depends on how quickly property values and demand can recover, particularly in key sectors like multifamily housing and commercial real estate, where bridge loans are most common.
What This Means for Private Lenders
Private lenders specializing in real estate financing stand to benefit from the recent interest rate cuts. For us, this may be especially true given our focus on multifamily housing, healthcare facilities, and alternative real estate investments like self-storage. A number of flexible lending solutions, which include bridge loans and hard money loans, position private lenders to take advantage of the current market dynamics.
One of Juniper Capital’s notable deals in 2023 was a construction loan for a self-storage facility in South Sound. This type of project, supported by bridge financing, has become increasingly popular as suburban areas experience heightened demand for storage space. The rate cut may make similar projects more attractive to developers, especially as borrowing costs decrease and consumer demand rises in suburban markets.
Additionally, our focus on healthcare projects helped us secure a hospital deal in central Washington. With healthcare continuing to be a resilient sector, the reduced rates could spur further investment in medical facilities, particularly in underserved areas outside the big urban centers, where such projects have both economic and community impact. The ability to provide tailored financing for these types of transactions positions any private lender well to attract more healthcare-related projects in the coming months.
Perhaps most significant for this sector is the impact of the Fed’s rate cuts on the multifamily housing market. In 2024, we helped close a construction loan for a multifamily development in the region. As demand for affordable housing surges due to Seattle’s high housing costs, lower interest rates could fuel more multifamily development in satellite cities surrounding Seattle and Bellevue. Bridge financing will continue to play a critical role in enabling developers to move on such opportunities quickly.
Path Forward
The Fed’s interest rate cut creates a mixed but ultimately positive outlook for private lenders. The increased competition in the bridge lending market and potential delays in property value recovery pose challenges. However, regional expertise and focusing on sectors with steady demand, such as multifamily housing/residential housing (due to lack of affordable housing), healthcare, and storage, should help private lenders navigate these headwinds.
As distressed assets become more common, there may be opportunities for private lenders to acquire discounted notes and/or provide creative financing solutions to borrowers in need of restructuring. In a market where flexibility is key, willingness to go beyond traditional lending structures gives such lenders an edge.
Looking ahead, the combination of lower borrowing costs and increasing demand for bridge loans in high-growth sectors sets the stage for companies in private lending to expand their portfolios further. Anecdotally, experience shows us that staying true to core values and underwriting conservatively matters the most. With interest rates no longer the biggest constraint, private lenders can leverage their capital to fuel projects that were previously sidelined, contributing to both the recovery and expansion of the real estate market in the Pacific Northwest and across this nation.
About the Author: Kurt Ursich, president of Juniper Capital, brings over 20 years of experience in lending, having funded over $1.2 billion in loans as an account executive and minority shareholder at a private lender. Prior to Juniper Capital, he was a financial advisor at Morgan Stanley and a report analyst at Deloitte & Touche. A graduate of Carroll College with Academic All-Conference honors in football, Kurt is actively involved in the National and Washington Cutting Horse Associations, the Rotary Club of Bellevue, and the University of Montana Foundation Board. He enjoys golfing, skiing, and spending time with his wife, Shaliena, and their two children.
EDITORIAL DISCLOSURE: Juniper Capital is an advertiser with The Registry. This content was chosen for its editorial value and an analysis of an industry executive with a deep understanding of the commercial real estate lending space.
