Future of Commercial Real Estate Financing
With Inflation at a 40 year high, Covid, and proposed Government Legislation, there is uncertainty in the market today and looking forward. “Long Term Interest Rates” still remain near Historical Lows. The Fed has said they will continue to taper down Bond Purchases this year and raise “Short Term Rates” multiple times, it may not have the impact of raising longer term rates. The US Debt relative to GDP is at its Historical Peak, we expect the government to do everything it can to keep longer term rates down so it minimizes debt service.
The good news is that Liquidity in Real Estate Capital Markets is strong and is expected to continue where the oversupply of capital is chasing yield. Despite Treasuries moving up 30 bp’s in the last month, Yield is still difficult to find and Cap Rates have continued to compress. We suggest property owners take advantage of this Perfect Lending Storm of Low Rates and Massive Liquidity. Lenders feel confident putting out capital due to the Conservative Underwriting standards that lenders had to conform to after the 2008 Great Recession. Lender’s Balance Sheets are strong and their loan portfolios are generally stable.
While we cannot predict what will happen with the overall economy, Commercial Real Estate is well-positioned with conservative overall leverage levels, Good Borrowers with a track record of performing in a specific product type are highly sought after by lenders whom have been “sharpening their pencils” to attract new clients. We have had success getting substantially better overall lending terms for our Clients when we compete with their existing lenders.
Recently Closed Transactions:
Sub 2% - Non-Recourse Floating Rate Loan - $9.8M Multifamily Bridge Financing – SOFR + 1.90%, No Floor, 3 year term with 1 year extension, No Reserves required, Interest Only, 0.50% Lender Origination Fee. Lender worked with borrower to maximize proceeds without full stabilization due to renovation of multiple units. This Non-Recourse Loan is currently at 1.95% due to low index of SOFR.
$28M Acquisition Financing – SOFR + 2.25%, 75% of Acquisition Price, 7 year loan, Interest Only for 3 Yrs – 225,000 SF, 100% leased
For a more detailed list of transactions, Click Here