1st QUARTER CRE FINANCING UPDATE
Good Morning……..
We recently were part of a panel discussion at the Atlanta RealShare Conference. Our findings and discussion centered on the debt market, which is in overall good shape. Delinquencies are rather limited, but the following key logistics and variables are taking place as noted by our research:
- Multifamily markets are reaching peaks in the real estate cycle. Cap rates are even below 5%, debt yields are as low as 7 % for select locations and product types and LTV ratios for life companies are reaching a peak at 75%. Loan amounts can be constrained now by DSC ratios due to low cap rates.
- Other product types do not demonstrate the hot dynamics as the multifamily market, except for hospitality which is at the top of the cycle as well.
- Loans have been priced off the 10-year Treasury and not swaps since the swap spread is negative.
- Loan spreads have come down up to 20 bps since the beginning of the year, however, are not close to the levels of last Spring, particularly with Agency and CMBS pricing. Overall, generally rates are in the 4.25% fixed to 5% fixed range for multifamily fixed rate pricing. Other product types are approximately 5 to 10 bps higher.
- Construction lending is cooling down amongst the major commercial banks. Other debt funds and non-traditional lenders are picking up the slack.
As of the date here is the pricing hierarchy of non-recourse cost of money, beginning at the least expensive to most expensive. 10 Year fixed rate pricing and higher is measured, as adjustable pricing ranges from 250 BP over LIBOR and higher.
- FHA Pricing 3.25%, 35 Year fixed rate fully amortizing. MIP fee of .60% on most product types. All in rate is effectively 3.85%. Spread is 140 over 10 YR Treasury
- Insurance 3.85% floor. Spread is 190 BP over 10-year Treasury. Max LTV ratio is 75%. Preferred is 65%.
- Credit Tenant Bond Financing Approximately 200 bps over corresponding Treasury tied to lease term. AAA rated pricing.
- Agencies 4.30% fixed at max LTV ratio of 80%. Spread is approximately 245 bp over 10-year. 65% LTV ratio reduces rate 20 BPS.
- CMBS 4.65% fixed at 75% LTV ratio. Spread is approximately 280 bps over 10-year
NOTEWORTHY ITEMS……..
FHA A7 REFINANCES
If you have an FHA loan in place, let us run an analysis for you on your asset. We now have accessed the entire HUD database and have qualified hundreds of loans to determine the feasibility of a refinance.
If you can get a 30% true return on your effective costs, would you do it?
We do not waste your time with hypotheticals and get right to the facts on today’s pricing. You may be able to qualify today WITHOUT having to submit an application to HUD first! In other words, lock in your rate NOW! We recently received an A7 rate quote under this program as low as 3.15% fixed for up to 35 years. If you have a mortgage rate with HUD above 4%, then let us perform an analysis for you.
BEWARE OF SPECIAL SERVICER CW CAPITAL
“Because they can and that is what the documents say….”
That is their message on a recent new Freddie Mac refinance. We were refinancing a CMBS loan where the master servicer was Wells Fargo. The loan paid off 19 days past maturity. They were given notice the maturity date would not be met for a payoff. Most special services allow for a 30-day forbearance. Good old CW Capital quoted a $135,000 late fee on a $2.7 million balance. We ended up negotiating it down to $25,000, which is $25,000 too much. They apparently embrace a business plan which is absolutely incredulous and heartless. Please beware of this possibility when paying off CMBS loans.