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Q3 2021
Capital Markets Update

An Abundance Of Liquidity

With more buyers than sellers in the market adding downward pressure on cap rates, several traditional equity groups have entered the lending space seeking yield.  Underwriting criteria from Fannie, Freddie, and traditional permanent lenders have opened the door to lower cost, higher leverage debt funds aggressively trying to place floating money in the 3-4% range.  With continued uncertainty for the office market, lenders are focused most on tenant credit and financial health.  Multifamily remains the most actively sought asset class for lenders with rates in the 2-3%'s and leverage up to 80%.

Rate and Economic Indicators

- 10 Year Treasury plunged to 1.19%, indicating the market feels inflation could be more transitory.  
- LIBOR at 0.08%.  SOFR at 0.05%.  1 & 2-Year LIBOR Forwards at 0.87% and 1.01%, respectively.
- The Bloomberg rates team is still calling for a 2.0% 10T by year-end and 2022 trading between 2.0% - 2.50%.
- 850k jobs added last month vs. forecast 720k.  Hospitality accounted for 343k of those jobs.  
- The unemployment rate ticked up slightly to 5.9%.
- Consumer Confidence hit a post-pandemic high.
- Construction spending fell 0.3% when it was expected to rise 0.5%.

Recent Financings


West Hollywood
Creative Office
to Retail Conversion

Permanent Refinance

Private Investment Fund

8 Years Fixed

Full-Term Interest-Only


Tennessee Apartment Community

Cash-Out Refinance

Credit Union

15-Year Fixed-Rate

No Prepayment

Lender Details

Fannie Mae & Freddie Mac have removed all COVID reserve requirements, except for select student and senior deals.  They are also releasing holdback funds on existing loans.  Fannie Mae recently introduced a Sponsor-initiated affordability product to incentivize Borrower's to voluntarily place income and rent restrictions on a minimum 20% of a property's units.  Freddie Mac is competing with a 2+7 program -- floating for 2 years, then fixed for 7 with the fixed rate locked Day 1.  Life Companies are winning newer product and funding during lease-up in an effort to compete with Fannie and Freddie.  Banks and Credit Unions remain competitive for smaller balance, stabilized deals. Construction Lenders are selectively pushing leverage well past the typical 60-65% LTC, up to as high as 85% for select projects and Sponsors.  







10-Year Fixed


2.40% - 3.05%

30-50 days



10-Year Floating


2.25% - 2.50%

30-50 days


FHA Refinance

35-Year Fixed


2.75% - 3.20%

120-150 days

includes MIP

Life Insurance



2.40% - 3.15%

40-50 days




3.10% - 3.80%

40-45 days

debt yield


Banks &

Credit Unions


3.0% - 3.75%

45-70 days



Debt Funds 


3.25% - 5.25%

14-40 days


Breaking It Down - PRIME vs. LIBOR

PRIME (also known as WSJ PRIME) is the rate banks lend to their top customers.  It is determined by surveying 30 of the largest banks.  When 23 or more banks change the rate, the PRIME rate will change.  PRIME is reactive meaning it only resets after Fed Funds changes.


LIBOR is the average interest rate at which banks borrower from each other.  USD LIBOR is determined by surveying over a dozen banks daily, removing the four highest and lowest responses, and averaging the remaining.  LIBOR is proactive, meaning it begins to climb in anticipation of changes to the Fed Funds. 

PRIME has averaged:

 - 2.83% above LIBOR since 1990.

 - 2.94% above LIBOR since 2000.

 - 3.02% above LIBOR since 2010.

Prime vs. Libor.PNG
Tim Gerlach Headshot - smile.jpg

Tim Gerlach, CPA  |  Principal

Direct: 323-505-9222

CPA Lic. 130463  |  Broker Lic. 02038912

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