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| John Oharenko |
Chicago, IL – Real Estate Capital Institute finds another month of relatively steady capital
markets activity. For the most part, mortgage pricing remains
unchanged, but a shift is occurring in types of lenders, particularly in the
multifamily sector.
According to John Oharenko, director of the Real
Estate Capital Institute®, "Most investors consider this late-cycle
segment of the market a good time to exercise discipline when looking at new
deals. That said, interest rates are the least intrusive obstacle to
obtaining a favorable capital structure."
As agencies reach their “cap” lending volume on conventional
deals, other lenders are picking up the slack. Additional notable
market trends include:
Flat Rates/Spreads - In the past month,
benchmark rates moved higher by about five basis points, a barely noticeable
difference. Meanwhile, mortgage spreads remain almost unchanged, as
lenders aggressively compete for limited funding opportunities.
Saving “Green” - "Green"
deals on affordable/workforce housing loans remain the most coveted funding
targets with the agencies. Pricing discounts of 20 basis points are
typical, along with full leverage (e.g., 75% LTV) availability. Projects
most suitable for such programs are older vintage apartment buildings,
generally constructed prior to the 1980s, where “green” upgrade possibilities
prevail.
Highway Speed Limit Pricing – Staying within
posted highway speed limit ranges also applies to mortgage leverage ranges of
55%-70% LTV [vs. MPH]. Best pricing offered for “slower”
lower-leverage deals at 55% or less. Life companies and agencies
battle for such loan opportunities, dipping to spreads of 125 basis points, or
less, in some cases. “Higher speed” loan opportunities demanding
debt levels of 65% to 75% are priced in the 165-185 basis point
range. The same price range for much of the past year, or so.
Ten-Year Term Rules – The optimum loan term for
permanent debt continues to be 10 years. Nearly no appreciable
difference between seven and 10-year pricing. In fact, five-year
pricing can be more expensive, as the funding arena shifts from perm lenders to
banks, based on higher cost-of-capital parameters.
The Real Estate Capital Institute® is a volunteer-based
research organization that tracks realty rates data for debt and equity yields.
The Institute posts daily and historical benchmark rates including
treasuries, bank prime and LIBOR.
CONTACT:
John Oharenko
john.oharenko@reci.com
Executive Director
The Real
Estate Capital Institute®
3517 West Arthington Street
Chicago, Illinois USA 60624
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