Apartment building investment loans in 2014, thoughts and predictions on what’s in store from lenders large and small and the organizations who represent them:
Greystone via MultiHousingNews: We do think there will be more capital available,” says Bob Barolak, co-COO at Greystone. Lenders will become even more eager to make loans in the multifamily space, he says, because of greater confidence in the economy and markets.
Another major reason for an expected bump in capital available in the next 12 months is that CMBS financing has come back into the multifamily sector—from a volume of practically zero in 2012. They will continue to increase market share significantly in 2014.” Currently, CMBS multifamily financings are carrying interest rates of about 5.10 to 5.20 percent, or about 10 to 15 basis points lower than rates in Fannie Mae transactions, according to Barolak.
Maximum LTVs on CMBS loans—up to 75 percent on 10-year terms for multifamily properties—have also become competitive with those of Fannie and Freddie loans. Moreover, CMBS lenders can become “extremely aggressive” for deals they want to acquire to round up a securitization pool, Barolak says. In such instances, “they can dramatically lower the interest rate significantly below what Fannie and Freddie will offer.”
Quick update: The 10 year Treasury (T10) climbed back up into the 2.60% range while the 10 year fixed apartment building loan we track moved up to 5.033%. The spread between them widened to 242bp but remains below the 2013 average of 265bp. This week we’ve added the darker green line to show the average spread between the T10 and the apartment rate on the chart. Note that it uses the Right Hand Scale along with the spread itself: