The financing market for commercial real estate is officially back for all product types and lenders. We strive to procure the BEST financing available based on our clients’ objectives, thus we continuously track what is going on in the commercial real estate financing market.
Banks, life insurance companies, conduits, credit unions and agencies are all active in the financing arena and at a generally healthy pace. Banks do provide less onerous underwriting criteria and potentially higher loan amounts. However, maximum leverage with lenient underwriting is not always the best thing in the long run for borrowers. While banks are making a run at more deals, they generally limit fixed rates to 5 years or less, price higher spreads over corresponding Treasuries, and will require guarantees for non-owner-occupied real estate loans. Other lenders will go out anywhere from 10 to 30+ years on maturities, non-recourse. Also, banks generally CANNOT compete with long term pricing. Banks that utilize interest rate swaps would provide competitive pricing for 5 Year bank rate at 4.15%, utilizing a 5 Year swap spread of 2.50% as of today. For a spread of 2.00% the all-in rate is 3.65% for 5 years. Non-bank lenders are general below 2% spreads. Banks can compete if the borrower has corresponding balances in the bank, but remember most banks have a pricing model that precludes pricing that is competitive with non-bank lenders on longer term deals.
Here is what the overall financial markets are screaming about interest rates as of recent: No short-term rate movement for the next 12 months. This is based on expectations from investors trading futures contracts on the 30 Day Libor, forward commitment premiums in the market and comments from Fed Chairman Yellen this morning. The economy has to be more robust to justify any rate increases by the Fed according to Yellen’s speech. Yellen said, “interest rates are unlikely to begin rising until we’re in a strong economic recovery” and indicated that labor markets would need to keep improving for QE to finish in the Fall. Of course, it’s anyone’s guess!
Let’s take a look at the best rates and terms we are seeing in the marketplace:
* 3% fixed for 3 years, adjusted every 3 years @ 3 Year Treasury +1.80 with floor of 3%, 9 Yr maturity (Source is Life Company with LTV ratio at 65%)
* 3.75% fixed rate loan for 35 Years prior to .65% MIP (Source is HUD Lender) GNMA spreads have come down approximately 40 basis points since last Fall.
* 4.35% fixed rate loan for 10 Years (Source is life insurance company and agency with LTV up to 75% to 80%)
* Libor rate 1% strike price (Libor Cap) fee is .35% and .45% for 1 and 2 years respectively.
* 1 Year Forward Rate Premium is only 30 basis points for 10 Year Money but 160 basis points for a 2 Year forward commitment.
Generally, for non-bank lenders, spreads are approximately 170 bp to 200 bp over the corresponding Treasuries. Based on all indicators with no major craziness occurring, rates are expected to hold steady.
Trillium Capital Resources facilitates financing for all property types, with loan execution from our correspondent lenders. We will not be OUTBID or OUT SERVICED on any financing deal and will always be competitive with ANY lender!!!
CALL OR EMAIL US TODAY FOR A FINANCING QUOTE!!!
Our Network of Funding Sources Specializing in the following Product Types:
Apartments – HUD, FNMA, Freddie Mac, Life Companies & Conduit Market. LTV ratio up to 80% except for Life Companies, which is up to 75%.
Retail – Life Companies, Conduit & Private Placement Capital. Up to 95% LTV for single credit tenant and up to 75% LTV for all other lenders.
Hospitality – Life Companies & Conduit up to 65% LTV
Self-Storage – Life Companies & Conduit up to 75% LTV
Office – Life Companies & Conduit up to 75% LTV
Deal sizes range from $1 million and up for most product types.