The Real Estate Capital Institute, a volunteer member, Chicago-based organization, reports bright spots in the capital funding marketplace are beginning to appear.
“More life companies, banks, pension funds and other sources not plagued with legacy deals are re-emerging,” says RECI Research Director Nat Zvislo.
“Initially, the pricing requirements are steep and leverage remains conservative, but some loosening is expected as these players start competing for transactions,” he says.
This is what RECI’s members are telling Zvislo:
Within the past month, rates have continually climbed for longer-term treasuries, nudging upward by more than a quarter point.
* Limited Growth: Few, if any, markets are underwritten with any type of income growth. On the contrary, most lenders are forecasting flat or declining income conditions with expenses rising.
* Greater Equity: For refinancings, borrowers must show at least 20% or more of "real" equity as cashouts are frowned upon.
* More Reserves: Effective property age concerns are forcing borrowers to set up larger reserves for maintaining and retaining competitiveness.
He suggests, "As TARP/TALP funds trickle into the financial system and lenders mark down legacy assets to current metrics and sell those assets, more badly-needed liquidity will return to the industry and transaction activity will increase."