Parkview Insights | Market Trends & Updates
Paul Rahimian, Founder, CEO | Ted Jung, Chief Credit Officer | March 2025
Dear Partners,
Thank you for taking the time to read our first issue of Parkview Insights, a recurring thought piece that shares our perspective on key issues impacting commercial real estate (“CRE”) lending in the U.S. In this issue, Chief Credit Officer Ted Jung and I discuss the current state of regional banks in the U.S. and the challenges they face with both troubled existing loans and new originations, along with the implications for borrowers, alternative lenders, and the banks themselves.
We look forward to continuing to provide you with timely insights on the state of the market and are pleased to share this first piece in our ongoing series.
Sincerely,
Paul Rahimian
Founder and CEO of Parkview Financial
This month marks the two-year anniversary of the failures of Silicon Valley Bank and First Republic Bank. Although the risks of contagion were contained at the time, we believe there is continued stress on regional bank balance sheets that will have implications for commercial real estate for the foreseeable future. In his July 2024 press conference, FOMC Chairman Powell noted that commercial real estate loan risk will be with regional banks for years. Specifically, we are monitoring the following:
High Exposure to CRE Loans
Regional banks have significantly higher exposure to commercial real estate loans compared to larger banks. CRE debt makes up 48% of total loans at regional banks versus only 13% at large banks[¹]. As reflected in the figure below, close to 60% of regional banks have CRE-to-Equity ratios north of 300%, with close to a third above 400%, levels that regulators consider potentially risky. This concentration has not only made regional banks particularly vulnerable to the CRE market downturn precipitated by aggressive Fed hiking starting in 2022 but impinges on their ability to make new loans.
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Maturing Debt
A substantial portion of CRE debt is set to mature in the coming years, with regional banks accounting for 70% of the more than $1.6 trillion in CRE debt maturing in 2025 and 2026 according to CoStar (Q4 2024). This significant volume of maturing debt poses a refinancing challenge, especially in a high interest rate environment.
Increased Risk of Defaults
The combination of falling property values and high interest rates has increased the risk of default on CRE loans. Some regions, such as San Francisco, have seen office loans facing the highest risk of default among all U.S. metro areas. The sharp decline in office property values has exposed vulnerabilities in regional banks, with many ramping up loan modifications to manage growing distress in their CRE portfolios.
Regulatory Oversight
This concentration of CRE exposure in regional banks has drawn the attention of regulators, who are concerned about the potential for further stress in the banking sector, which may lead to stricter oversight. Such measures could include more rigorous monitoring of lending practices, enhanced capital requirements, and tighter risk management protocols to safeguard the sector against potential downturns.
Conclusion
The full impact of the CRE market downturn on regional banks remains to be seen, and the situation continues to evolve as the market adjusts to new economic realities. However, we believe regional banks are vulnerable and, at the very least, will be unable to be a consistent source of capital for CRE for the foreseeable future.
With regional banks struggling with their CRE loan portfolios, alternative lenders like Parkview have opportunity to fill the void for financing. Parkview can offer more flexible terms along with faster execution, catering to borrowers who may not meet the stricter criteria of traditional banks. In the current market, Parkview is evaluating opportunities in the multi-family and single-family sectors, which, with an expected 2025 vacancy rate nationally of 4.9%, show promise. Furthermore, as part of its strategic approach Parkview intends to be active in markets that exhibit favorable or balanced near-term supply/demand fundamentals as well as a positive long-term outlook and that are relatively “unbanked” due to the retrenchment of regional banks.
We firmly believe that the current market environment presents attractive opportunities to originate CRE loans with compelling risk-adjusted return potential especially as higher interest rates are likely to persist. With its extensive direct origination network, rigorous underwriting process, and in-house development professionals, Parkview is well-positioned to capitalize on these opportunities.
By Paul Rahimian, Founder, CEO and Ted Jung, Chief Credit Officer
ABOUT PARKVIEW FINANCIAL
Parkview Financial is a direct private lender specializing in commercial and residential real estate financing. Parkview provides short-term bridge and construction loans secured by first trust deeds to sponsors throughout major markets in the United States. Since inception, Parkview has successfully executed more than $4 billion in financing for multifamily, retail, office, industrial and mixed-use projects with executed loans ranging from $5 million to $300 million.
Headquartered in Los Angeles and with offices in New York and Las Vegas, Parkview has grown exponentially since it was founded in 2009 by CEO Paul Rahimian. Parkview has earned an unparalleled reputation within the commercial real estate industry as one of the most respected private lenders in the nation. This has been accomplished through Parkview’s proven ability to provide fast, creative financing solutions to borrowers who need certainty of execution. Fortified with an experienced team of in-house experts, Parkview is able to be nimble and creative even when it comes to some of the most challenging projects.