Monday, May 1, 2017

RECI Reports Borrowers Keep Winning as Treasuries Move Downward

Jeanne Peck

Chicago,IL, May 1, 2017 - The Real Estate Capital Institute reports overseas "shock" events in North Korea,
Turkey and Syria spread market jitters, as investors flock to the safety of
US government treasuries.  Even with the Fed's policy to control inflation
with interest rate hikes, longer-term treasuries stubbornly move downward to
levels not seen since last fall. 

Borrower keep winning under such circumstances, capturing permanent
fixed-rate debt within the higher-three-percent range to the
lower-four-percent range for most types of conventional loans.  However,
shorter term rates also start with a three-percent handle, since floating
rate indices move in tandem with Fed benchmark rates.  More specifically,
even as treasury notes dropped about a quarter point since the beginning of
the year, 30-day Libor rates rose by about the same amount. A flattening
yield curve is the result - long rates are the "sweet spot" in the realty
capital stack.

The markets are flooded with capital and no shortage of real estate debt
exists.  Yet lenders are more cautious given the current point in the
economic cycle, and more equity is typically required to attract decent
financing terms. The longer-term lending market based upon the lowest rates
is dominated by life companies. Agencies comfortably capture multifamily
loans, often providing attractive pricing/leverage combinations and programs
to foster value add and affordable housing.  Conduits focus on larger
single-asset securitizations and higher-yielding loans that are not good
fits for LifeCos/agencies.  Debt funds provide higher leverage and more
structured fundings, especially bridge loans for asset repositioning
situations.  Banks fund new construction loans, but at more conservative
levels than in the past few years.

As for product type, investors continue clamor for multifamily assets this
year, with private funds overwhelmingly dominating the market, representing
nearly two-thirds of the market share by some estimates.  Foreign investors
are in on the party as well, especially in gateway markets.  All in all,
while interest rates have climbed since the election, the impact on pricing
has been minimal for institutional-quality properties.

The Real Estate Capital Institute's director, Jeanne Peck, advises, "Global
issues help flatten the yield curve.  International demand for safe-haven
long treasuries have kept yields stubbornly low... a real benefit for
permanent fixed-rate borrowers."

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

The   Real Estate Capital Institute(r)
3517 West Arthington Street
Chicago, Illinois USA 60624

Jeanne Peck, Executive Director

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