Category: Financing

Lenders Enter 2020 Willing to Fund New Apartment Construction

Lower interest rates are helping offset rising labor and materials costs and helping sustain apartment construction levels.

As fears of a possible recession and overbuilding in the multifamily sector diminish, lenders are showing they still have an appetite for financing construction projects. The availability of mezzanine loans and lower interest rates are helping fuel this activity and helping to offset rising construction costs.

Even if the economy shrinks sometime in 2020 or 2021, multifamily pros believe demand for apartments is still strong enough to prevent major damage to apartment properties in most markets—even with the thousands of new apartments recently opened by developers across the country. “There is clear evidence that multifamily is the asset class best equipped to weather a downturn,” says David G. Shillington, president of Marcus & Millichap Capital Corp., based in Atlanta, pointing to overall fundamentals in the sector that remain healthy.

“Occupancy rates continue to stay steady in the face of new supply,” adds Bill Leffler, senior vice president of equity and structured finance for CBRE, based in based Atlanta. “The strong economic conditions, job creation and population increases (in the southeast) still fill up the new product hitting the market.”

Click Here For The Full Article

SUBSCRIBE TO OUR NEWSLETTER

Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.


Picture: Pixabay

Banks Focus CRA Dollars on Affordable Housing

The banks see the affordable and workforce housing sectors as steady investments.

Banks provide more than $100 billion in capital each year to low and moderate-income communities as part of their Community Reinvestment Act (CRA) investing requirements. Increasingly, they are focusing those dollars on supporting affordable housing projects.

“As a regulated institution, we are required for CRA purposes to make these types of community development investments, but we are really passionate and purposeful about impacting our communities,” says Keitt King, head of Truist Community Capital. Truist is the new entity from the recent merger of SunTrust and BB&T. “I like to think we would be doing this at Truist whether the regulators required this of us or not. We see it as good business, and an opportunity to build our communities.”

Prior to its merger with BB&T, SunTrust had announced a $60 billion community benefit plan that Truist will now be executing over the next three years. Part of that commitment includes a $3.6 billion commitment to CRA eligible investments.

Click Here For The Full Article

SUBSCRIBE TO OUR NEWSLETTER

Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.


Picture: Pixabay

Liked 2019’s mortgage rates? 2020 will be lower

The year that’s passing was marked by the Fed’s refusal to bend to the president’s will

The year that’s winding down will be remembered, in the real estate world, for its mortgage rates that persistently and unexpectedly declined.

While rates aren’t going to plunge another percentage point – November’s average rate for a 30-year fixed mortgage was 3.7%, compared with 4.87% in the year-ago month, according to Freddie Mac data – they’re going to set some new lows, Fannie Mae said in a forecast.

The average fixed rate probably will be 3.6% in 2020, which would be the lowest annual average ever recorded in Freddie Mac records going back to 1973. It compares with 3.9% in 2019 and 4.5% in 2018, according to Fannie Mae. The current record was set in 2016 when the annual average fell to 3.65%.

Click Here For The Full Article

SUBSCRIBE TO OUR NEWSLETTER

Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.


Picture: Pixabay

Five Tips for Securing Multifamily Financing and Articulating Your Case to Capital Providers

This about what is your borrower story when trying to secure financing.

With a possible recession looming, investors seeking to de-risk their portfolios are looking at an increasingly limited menu of stable investment options. Yet one of those options is clearly evident: multifamily remains a popular option for investors and capital providers alike. That’s largely because home affordability issues and changing lifestyle preferences are driving more renters to stay in apartments longer, strengthening demand and, in turn, pushing up rents. In fact, rents in the third quarter of 2019 were up 2.9 percent over the previous year, according to RealPage Inc., a real estate analytics firm.

Foreign investors alone acquired $16.1 billion of apartment properties in the U.S. between the second quarter of 2018 and the same period this year, according to research firm Real Capital Analytics. This occurred even as those investors pulled back on other asset classes.

Investors who are trying to increase their presence in the multifamily market don’t have to look far to find lenders to finance an acquisition. There’s plenty of capital to go around. The Mortgage Bankers Association (MBA) projects multifamily lending will grow to $359 billion in 2019, up from last year’s record total of $339 billion.

Click Here For The Full Article

SUBSCRIBE TO OUR NEWSLETTER

Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.


Picture: Pixabay

Investors Hit the Pause Button on CRE Debt Strategies

Private equity investors allocated a lot of capital to CRE debt plays over the past few years. That trend has been slowing of late.

Private equity real estate funds have stepped up to be a major source of financing for the commercial real estate industry—and a bigger allocation for investors. However, fund managers may face a tougher road ahead for fundraising in the near term as capital flows to the sector slow.

Debt strategies have moved from the fringe to a more established and accepted part of the commercial real estate investment universe over the past several years. That shift has generated a significant wave of capital. According to London-based research firm Preqin, global private equity real estate debt funds have raised about $165.6 billion since 2013.

“Over the last three years in particular we’ve seen a massive amount of capital allocated to debt funds,” says Todd Sammann, executive managing director and head of credit strategies at CBRE Global Investors. The vast majority of that capital is targeting double-digit returns and is almost entirely allocated to closed-end funds. “The industry has seen fundraising trail off a little bit in 2019, which is not particularly surprising given the amount of capital that was formed,” says Sammann.

Click Here For The Full Article

SUBSCRIBE TO OUR NEWSLETTER

Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.


Picture: Pixabay

Banker Warns of Exuberant Florida Developers

Kessel Stelling, CEO of Synovus Financial, is concerned about lenders taking too much risk on construction loans.

(Bloomberg)—A construction boom in Atlanta, Nashville and Orlando raises concern that some lenders may be taking on too much risk, Synovus Financial Corp.’s top executive said.

“I still have some scars from the last crisis,” Kessel Stelling, chief executive officer since 2010, said in an interview at Bloomberg’s Atlanta office. “We lived to tell about it. I want to be sure we live to tell about it again.”

Columbus, Georgia-based Synovus, which operates in five states, repaid $968 million in funds to the Treasury Department in 2013, becoming one of the last large banks to rid itself of the stigma of the Troubled Asset Relief Program in the wake of the 2007-2009 recession that brought the bank close to collapse.

Click Here For The Full Article

SUBSCRIBE TO OUR NEWSLETTER

Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.


Picture: Pixabay

Low Interest Rates Spur More Refinancing Activity

Even more favorable rates have unleashed a fresh wave of refinancing activity in recent months.

Borrowers have been enjoying a low interest rate environment for some time. Yet the further drop in interest rates this year has stoked a surge in refinancing activity.

The Federal Reserve kicked off the first of three rate cuts in late July, which subsequently pulled commercial real estate lending rates lower in the third quarter. Notably, the 10-year Treasury dropped by 50 basis points in August to a near cyclical record low of 1.47 percent. The favorable rates have unleashed a fresh wave of refinancing activity. “You are seeing a lot of borrowers paying off loans early to take advantage of the low rates,” says Peter Norrie, managing director, capital markets, at Cohen Financial in Portland, Ore.

For example, some of the 10-year loans that were done seven years ago were done at 5.5 percent, whereas borrowers now have an opportunity to refinance at sub-4 percent. So, the math on that works very well for some borrowers, even if they have to pay a penalty for an early exit, notes Norrie.

Click Here For The Full Article

SUBSCRIBE TO OUR NEWSLETTER

Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.


Picture: Pixabay

CRE Lenders Try to Hold On to Underwriting Discipline to Avoid Future Refi Risk

In a market with high demand for new loans, lenders are trying to structure deals with an easy exit at maturity.

The drop in interest rates has been great news for borrowers, with low cost of capital that is effectively giving them more buying power. Yet, for the most part, lenders are keeping borrowers in check on leverage and structuring deals with an eye on an easy exit at maturity.

Lenders learned some hard lessons in the last recession that are now being put to work to mitigate future refinancing risk. “We’re nowhere near the same place that we were back before the Great Financial Crisis,” says Tom Genetti, a managing director at capital services provider Berkadia. “I think the discipline being shown in the marketplace today is substantially higher. There is real equity in these deals, and no one is allowed to put in fluff or big fees to make their (equity) look bigger than it should be.”

There’s a lot of data that goes into refinance tests, and that data definitely helps the lender get comfortable with the refi risk coming out in the future, adds Jeffrey Erxleben, executive vice president, regional managing director with NorthMarq Capital in Dallas.

Click Here For The Full Article

SUBSCRIBE TO OUR NEWSLETTER

Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.


Picture: Pixabay

Maximizing LIHTC Investments: Understanding Nuances Can Determine Profit

Underwriting structuring and due diligence risk management for Fannie Mae, Freddie Mac, or HUD financing vary greatly, as with government money comes a host of requirements.

The Low-Income Housing Tax Credit (LIHTC) is a federal tax credit created through the Tax Reform Act of 1986, and administered by the IRS, to encourage private equity investment in affordable and public housing by commercial real estate stakeholders.

Tax incentives are provided in exchange for capital for development and/or financing costs directly used to create and preserve affordable housing, including new construction, acquisition, or rehabilitation of existing properties. These tax credits are proportionally set aside for each state based on population and are distributed to the state’s designated tax credit allocating agency. These state agencies then distribute the tax credits based on the state’s affordable housing needs and federal and state-specific program requirements. This is known as the Qualified Allocation Plan (QAP) process. The Federal Housing Finance Agency also recently increased the lending caps for Fannie Mae and Freddie Mac, which have been putting more capital into LIHTCs since 2018, to $100 billion per agency for five quarters. The FHFA will also require that 37.5 percent of agency lending be “mission-driven, affordable-housing” loans. Earlier this year, The Department of Housing and Urban Development (HUD) announced the start of a LIHTC Pilot Program, including an expedited review process for loan approvals for new construction or rehab tax credit projects.

Click Here For The Full Article

SUBSCRIBE TO OUR NEWSLETTER

Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.


Picture: Pixabay

Lenders Won’t Cover Rising Construction Costs on Multifamily Projects

To make up for rising materials costs, apartment developers are being forced to put more equity into their projects.

Low interest rates are not enough to make up for the rising cost of construction on new apartment building projects.

“The drop in interest rates will not make a bad project look good,” says Matthew Swerdlow, director of capital services for Ariel Property Advisors, a real estate and advisory services firm based in New York City. “If it didn’t work with higher interest rates, it might not work with low.”

Apartment developers across the U.S. are struggling to pay for the rising cost of construction. Banks and debt funds are still eager to make construction loans at low interest rates, but these loans are not typically large enough to cover the higher cost of development. Many developers are now being forced to accept lower profits to make their deals work.

Click Here For The Full Article

SUBSCRIBE TO OUR NEWSLETTER

Start receiving; press releases, commercial real estate news, information and trends on particular markets and regions.


Picture: Pixabay
Scroll to top