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