APRIL/MAY CRE FINANCING MARKET UPDATE
The year as rapidly passing by (like all years seem to do as we get older) and the financing market is taking interesting turns and twists:
1. FNMA/Freddie Mac Multifamily spreads are widening (about 215-220 basis points over 10 Year Treasury)
2. HUD (GNMA spreads) are staying relatively low (about 100 to 110 basis points over the 10-year Treasury)
3. CMBS spreads are constant (about 170 to 240 basis points over the 10-year Treasury)
4. Life Company spreads are constant (about 170 to 190 basis points over the 10 Year Treasury.
5. Swap stack over the 10 Year Treasury is compressing (from 12 basis points to about 8.5). The swap stack is also known as the 10-year swap rate. As of this morning, the 10 year is at 1.96, while the 10 year swap is at 2.08.
When selecting a product type to pursue, it is important to know where the overall spreads are, including the spread for 10 year swaps, which DRIVES the secondary mortgage markets (GNMA, Freddie Mac, FNMA and CMBS).
On that note, secondary market transactions, which we are extensively involved in, should be 1/8th of a percent of other bidders, given all things being equal. Please note that generic quotes from lenders are just that…GENERIC. A real meaningful loan quote IS NOT possible UNTIL all the key variables are known:
1. Age of property. Property condition is also considered. (The newer the better)
2. Property performance. (This is self-explanatory)
3. Location (Important for Life Companies)
4. Sponsorship Info (Important for ALL lenders)
5. Loan Amount (The higher the better, over $5 million)
6. Loan To Value (The lower the better)
7. Debt Yield (a CMBS terminology, the lower the better)
*Please note that generally HUD pricing has nothing to do with any of these variables, EXCEPT for loan amount.
Please do not get tricked into a bait and switch from a lender!!!! Know where your property fits in as it relates to these variables above. Trillium Capital Resources will provide you a RELIABLE and COMPETITIVE loan, and NEVER bait and switch you.
We provide ANYTHING the competition provides, interest only periods, long term amortization, forward locks, etc. We have detailed data analyzing the financing markets, WE KNOW we will always be in the game.
At TCR, we pride ourselves in dealing in reality. We are in the market every day and have our fingers on the pulse of the daily spread changes across all lending product types. If you are receiving quotes that are shockingly aggressive and too good to be true, then you may be dealing with a Fairytale quote or a BAIT AND SWITCHER! They are unfortunately out there!!!