Tuesday, August 4, 2015

Real Estate Capital Institute Reports Interest Rates Slowly Trending Upward


Jeanne Peck
Chicago, IL - To date, real estate investors enjoy low
rates thanks to a global crisis merry-go-round with China, Ukraine, Russia, Greece and now Iran creating cycles of market panic and driving investors
back to the safe haven of US treasuries.  And money never sleeps as interest rates are trending upward this year, although at a calmer pace.

The Real Estate Capital Institute's(r) director, Jeanne Peck, predicts "Fed
rate hike discussions will spook owners into action, both for sale and
financing.  Look for 'Busy Money' as the theme for this fall, when investors
return from summer vacations to buckle down on their capital needs."

Benchmark yields:  Good news for lenders sources, bad news for borrowers.
The Fed has not raised long-term rates for nearly a decade, but the low-rate
party may be about to end.  In the past month, the 5-year and 10-year
Treasurys fluctuated about a quarter-point, landing towards the lower end of
the range of about 1.5% and 2.2%, respectively.  Current rates are in line
with the end of 2014, still reasonably low in comparison to the past few
years.          

Mortgage Spreads:  More good news for lenders.  Permanent lenders exceed
funding targets as worried borrower flock to fixed-rate debt in anticipation
of a Fed rate hike.  Since permanent lenders are processing pent-up demand,
spreads are likely to rise; many funding sources choosing to provide less
leverage rather than raise spreads to remain competitive.  Higher quality
loans garner the most attention with LifeCos and conduits, while more risky
deals are left to public/private debt funds which are more prevalent.  Banks
rely on more on recourse, but will offer highly competitive spreads for
floating-rate and short-term debt.

Funding Structures:  "Take me to the bridge" is a popular realty finance
outcry, as multiple players jump into the structured finance funding
spectrum.  Many of today's bridge players need to supplement their mezz,
preferred equity and joint venture programs with a wider variety of options
to catch deals earlier in the funding cycle.  With barely any profits in
conventional debt business based upon interest rates of 3.5% to .5%, debt
funds entertain more entrepreneurial prospects including partially-leased
and limited construction projects.  Structures typically priced at combined
rates of 5% to 7% over a five year or less holding period.  Higher risk
pricing approaches double-digit returns, often hovering below equity yields.

For a complete copy of the company’s news release, please contact:

Jeanne Peck, Executive Director




No comments: