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| John Oharenko |
Chicago, IL, Sept. 6, 2020 – Chicago-based Real Estate Capital Institute notes the stock market continues
climbing, and realty mortgage spreads compressing based on record-low
treasuries.
The Fed also announced that rates would remain low, even
under inflationary pressures. As a result, borrowers enjoy the
"perfect storm" of low-interest rates for the foreseeable future.
Fixed-rate
debt continues to gain the most attractive pricing, especially for five-year
terms with low leverage (55% LTV or less).
Pricing
starts in the 2.5%-range, climbing about a quarter-point for ten-year debt, and
another quarter-point for leverage levels up to 80%.
These
rates apply to stabilized multifamily assets controlled by proven
sponsorship. Otherwise, most other well-performing commercial
properties achieve pricing closer to the 3% range based on a maximum leverage
of 65% LTV.
Floating-rate,
mezzanine, and other debt designed for new-construction or stabilization
programs are priced at 3% or more, mostly via banks.
Life
companies offer very diverse pricing, dipping below 2.5% for prime assets, but
mostly hover in the 3-3.5% range.
In
addition to overall realty capital market rates and trends, securitized lending
returns to a more "normalized" state.
CMBS
players underwrite new loans at 60% to 65% LTV with 10 years
interest-only.
For
example:
·
Multifamily rates hover in the low three-percent
range.
·
Office, industrial, self-storage, and
retail-property pricing starts at 3.25% and reaching about 3.5% for more
challenging loans.
·
Lodging remains problematic, as operators still
work through COVID issues.
John
Oharenko, director of the Real Estate Capital Institute,
notes, "The Fed's declaration to keep rates low helps force spreads
downward, as fierce competition exists for stabilized loan fundings."
Contact:
John
Oharenko
Executive Director
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