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.
92-Unit Luxury 55+
Independent Living
$13 million Lease-Up
Bridge Financing
Debt Fund
3+1+1 Interest-Only
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
Tim Gerlach, CPA | Principal
Direct: 323-505-9222
Tim.Gerlach@StoneHarborCapital.com
CPA Lic. 130463 | Broker Lic. 02038912