August 2, 2023

Seizing Opportunities in a Dynamic Financial Market

As we look back at the 2nd quarter of 2023, we note yet another round of Federal Reserve interest rate hikes, totaling 1.00% since January. This has resulted in increased pressure on banks and higher lending costs. While some banks have turned away new customers, others are actively seeking to acquire top-tier credits at bargain pricing to expand their portfolios. Despite the shifting market conditions, there are opportunities to strengthen your medical practice through aggressive financing terms on your physician-owned real estate.

Medical owner-occupied real estate remains one of the most desired credits for lenders. Even after the Silicon Valley Bank fallout, lenders are still hungry for commercial real estate opportunities. This presents a unique chance for you to make strategic decisions that align with your practice's growth objectives.

The uncertainty surrounding future Federal Reserve policies adds to the complexity of the current financial landscape. While the most recent FOMC meeting saw another 0.25% rate hike, where previously there had been a pause, there is strong supporting data (PCE, ECI, etc.) suggesting that inflation is cooling, which may allow the Fed to achieve their so-called “soft landing” (reducing inflation without large cuts in employment). The Fed will continue to adopt a meeting-to-meeting strategy for enforcing their economic policy with their next assembly scheduled on September 20th. Markets are currently projecting a 22% probability of a hike at that meeting. A clearer perspective on the Fed’s economic outlook, however, may be presented sooner during the Jackson Hole Economic Symposium in late August. Notably, the yield curve continues to remain inverted, highlighting a market that anticipates lower rates in the future but elevated spot pricing today.

In response to these dynamic market conditions, physician groups may be tempted to delay their projects until the markets stabilize. There may be ways, however, to achieve your real estate and operational goals without sacrificing financial stability. This was recently demonstrated with a CMAC client in the Southeast who secured a 10-year fixed rate in the mid to high-4’s.

Various risk hedging strategies can be explored to suit your unique risk profile and operational objectives. Whether you seek to float your rate until the interest rate environment improves or prefer to secure a fixed rate, consulting with experts in the industry will help you make the best decision for your medical practice.

In today's rapidly evolving financial markets, navigating the challenging macroeconomic backdrop can be a daunting task for independent medical practices. With our extensive network of over 1,500 commercial real estate lenders, CMAC is in constant negotiations to secure superior financing on behalf of medical clients. Schedule a call with our team to discuss your group’s unique needs and pave the way for your continued success.