The apartment building investment loan rate we track continued to trend downward as both the 10yr Treasury (T10) and the spread between the two came in during April. Today’s new rate on the loan is 4.733%, a 212 basis point spread over the T10 which was in the 2.61% area today. The six month moving average spread continues to fall suggesting that lenders are more confident and/or aggressive but the spread itself is above the March 17 low of 209bp.
This month we add a new rate which the ULI (Urban Land Institute) reports on from the Trepp survey. According to the ULI the Trepp rate is what large institutional borrowers could expect to pay on a 10 year fixed rate, less than 60% LTV loan for a “crème de la crème” core apartment property located in a gateway market. We track this rate as a barometer of what the largest lenders are offering their best customers on the most secure loans for any advanced warning about future rate and spread changes. See the ULI<60LTV Rate on the chart below (in gold). Note that the spread we chart is between 10yr loan we track (in orange) and the T10 (in blue):
Speaking of the spread between the T10 and the ten year apartment loan rate, now that Continue reading Apartment Building Investment Loan Rate Trends Lower as 10yr Treasury and Spread Fall.
MHN Online has a nice piece out this morning talking about what institutional and private equity equity providers are looking for in their apartment building investment deals. According to Brian Ward, CIO of TCG Capital Markets, the requirements are much tighter than just a few years ago. Here are the high points:
- Align the style and needs of the capital source with the operator. A long term operator shouldn’t be matched up with private equity that needs short term holds to clear their return hurdles.
- Equity capital today generally comes in two two types: preferred equity or joint venture (See the table linked in the article for a good breakout of when to use each).
- Blind pools are very difficult to get funded today —even the best and most sophisticated operators have had trouble executing this type of equity raise.
- There must be local knowledge on the management team, both lenders and investors want their operators close by.
- Operators must have Continue reading How to Structure Apartment Building Investment Partnerships by Brian Ward of TCG Capital.
Great podcast on the financing market for CRE and apartment building investment with a look at potential impacts from events around the world.
“In this Global In-Sights podcast, Spencer Levy, Executive Managing Director for CBRE Capital Markets, shares his view on the commercial real estate debt and equity finance markets. What are current key sources of capital, what is the current pricing of CRE debt, and what are expectations going forward? Are there key sectors that are attracting most of the capital flows? What are expectations for interest rates and how are investors underwriting the possibility of an interest rate spike in the next 2 to 3 years? What are some of the key positive trends that we suggest our clients look out for when selecting markets in which to invest?”
A few bullet points: Continue reading Rising rates won’t necessarily lead to higher cap rates on CRE, apartment building investments. CBRE debt & equity podcast.