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Q2 2021

Capital Markets Update

Lenders Expand Asset Classes

 

Competition and the need for lenders to place excess capital is driving more aggressive underwriting, rate compression particularly on the short end of the curve, and openness to asset classes like office, retail and hospitality that were largely off-limits in 2020.  

Key Rate and Economic Indicators

 

 - Since January 1st, the 10-year treasury is up 78 basis points (84%) from 0.93% to 1.71%.  Bloomberg’s fair value model puts the 10T at 3.07% by year-end 2022.


- The market now has a Fed hike priced in for 2022, sending interest rate caps up 50% the past couple weeks.


- SOFR (the Libor replacement index) has remained near 0% (currently 0.01%).  With the SOFR forward for January 2025 at 1.42%, floating rates continue to be a compelling alternative, especially for light value-add plays.


- The U.S. economy added 916,000 jobs in March (the most ever in one month) vs. a forecasted 660,000 gain.  Hospitality accounted for 280K.  The unemployment rate fell from 6.2% to 6.0%.


- Consumer Confidence is at a post-pandemic high.

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92-Unit Luxury 55+

Independent Living 

$13 million Lease-Up

Bridge Financing

Debt Fund

3+1+1 Interest-Only

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72-Unit Texas Apartment Community

Cash-Out Refinance

Freddie Mac

10-Year Fixed-Rate

Recent Financings

Lender Details

Fannie Mae & Freddie Mac are currently the best fit for pre-2010 construction assets with affordability that qualify for the Green Rewards Programs.  Life Companies are winning much of the 2010 and later Class A construction with loans $10+ million.  While Banks and Credit Unions still prefer multifamily and industrial, they are selectively lending more on retail and office, with some outliers lending up to 75% LTV.  Bridge and Construction lenders will keep their focus on Sponsorship experience, asset class, and business plan.  For multifamily construction, HUD is still providing the most favorable option for leverage (85%) and long-term fixed rates, if the 6-8 month closing timeframes with no ability to rate-lock until ~6 months into the process can be managed.

Lender

Max LTV

Rates

Closing

Notes

Fannie/Freddie

10-Year Fixed

80%

3.30% - 3.60%

45-60 days

N/A

Fannie/Freddie

10-Year Floating

75%

2.75% - 3.0%

45-60 days

N/A

FHA Refinance

35-Year Fixed

85%

2.90% - 3.30%

120-150 days

includes MIP

Life Insurance

Companies

75%

2.75% - 3.40%

40-50 days

N/A

CMBS

75%

3.30% - 3.75%

40-45 days

debt yield

dependent

Banks &

Credit Unions

70%

3.0% - 3.50%

45-70 days

term

dependent

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Tim Gerlach, CPA  |  Principal

Direct: 323-505-9222

Tim.Gerlach@StoneHarborCapital.com

CPA Lic. 130463  |  Broker Lic. 02038912