trends | Ashworth Partners

Rates For Apartment Building Loans About Where They Were A Year Ago Just Before…

The apartment loan rate we track popped up into the 4.70s today after spending the last three weeks in the 4.60s. Today’s 4.71% rate is about the same as it was a year ago, just before the taper tantrum hit. Monday quotes on the 10 year Treasury have climbed two weeks in a row now but remain below most recent highs of March, clocking in at 2.62 today. The downward march of the spread has flattened recently in the 2.0 – 2.15 range, including today’s number at 2.14. The ULI <60%LTV rate still looks like someone bouncing a ball down the stairs but their data is lagged a week so we’ll have to check back on Friday to see if that rate is going to tick up as well.

10 year Treasury versus Apartment Building Investment Loan Rete June 2014 — Click on image for full size

Speaking of the spread between the T10 and the ten year apartment loan rate, now that Continue reading Rates For Apartment Building Loans About Where They Were A Year Ago Just Before…

Apartment Building Investment Loan Rate Trends Lower as 10yr Treasury and Spread Fall.

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.

Apartment Building Financing Outlook for 2014

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.”

Life insurance companies are another Continue reading Apartment Building Financing Outlook for 2014

5 Key Trends from the ULI Report for Apartment Building Investors and Commercial Real Estate Pros

The Urban Land Institute/PriceWaterhouseCoopers annual report on Emerging Trends for Real Estate 2014 was released last week and apartment building investors and commercial real estate pros have some good things to look forward to next year. Note that this post refers to the Americas version of the report with separate sections on Canadian and Latin American markets but they also publish Asia-Pacific and European editions as well. This is the 35th edition of the report is it’s based on individual interviews or surveys from more than 1,000 investors, fund managers, developers, property companies, lenders, brokers, advisers, and consultants.

Here are the 5 key trends we should all be aware of with my comments:

Survey participants continue to rank private direct real estate investment as having the best investment prospects. Pretty expected from this group but the National Council of Real Estate Investment Fiduciaries (NCREIF) recently released its property performance index for the third quarter of 2013 and on a trailing 12-month basis, the index’s return was 11.0 percent, split about 50/50 between income and appreciation. A pretty nice return compared to fixed income rates and a much safer looking bet than buying equities at their all time highs.
Dependence on cap rate compression to drive value is being replaced by an emphasis on asset management. Especially in the 24 hour gateway markets apartment building cap rates are about as low as they can get (well until you look at Vancouver BC) so property performance has to come from actually making the property perform. You also have the problem of what to do with your proceeds if you do sell, as you would be reinvesting right back into the same cap rate market that you sold in… unless you changed to a higher cap rate sector, suburban strip centers anyone?
Opportunities to develop property are finally appearing in sectors other than multifamily. CBRE Econometrics had a piece out last week showing that large (> 350k sf) warehouse properties are being snapped up as fast as they’re being built. Maybe developers who moved over to doing apartments the last few years will move back to their home sectors and ease off on the new supply of multifamily units.
Value-added investment ranked highest in terms of investment strategy; distressed properties and distressed debt ranked last. We were licking our chops a few years ago waiting for RTC 2.0 fire sales to begin and while we were able take down some bank owned inventory, the anticipated tsunami of defaults on commercial loans never materialized. At this point most everything has been extended and pretended into performing status or sold off and so it’s back to making money the old fashion way: Finding and/or creating value.
Both equity investors and lenders are widening their search for business to include secondary markets and niche property types. This will be a double edged sword for investors who are focused on those secondary and tertiary markets as debt financing will be more available but there will also be more competition from sophisticated outsiders with deep pockets. The key will be to make them your buyers so dig in, find the right properties and tie them up quickly.

As always with real estate, sectors and markets are so distinct from one another it’s almost pointless to generalize as the chart above attempts to do so next week I’ll dive into the apartment sector to see what gems they’ve unearthed. Meanwhile for the Continue reading 5 Key Trends from the ULI Report for Apartment Building Investors and Commercial Real Estate Pros

5 Key Trends for Senior Living Investors, Developers and Operators via Senior Housing News

Senior living consultants Accent have published a whitepaper on the emerging trends their clients are searching for when selecting an independent living, assisted care, skilled nursing, memory care or other type 0f retirement community. The paper is available for free download on their website (registration required).

5 emerging trends for senior living investors, developers and operators. More at www.ashworthpartners.com — Source: www.accentonseniors.com

“This informative whitepaper provides an in-depth look at how seniors’ and baby boomers’ desire for a more fulfilling lifestyle as they grow older is driving several key developments in senior living communities. Find out how today’s active and engaged seniors are inspiring the current trends that are changing the landscapes of senior living communities. Download this informative free white paper to learn more about the expansion of the following five trends:”

Health & Wellness Programs
Lifelong Learning Programs
Energy-Efficient Design
Technology-Enabled Health Monitoring
Enhanced Memory Care Programs

One example of the lifelong learning trend is: “Wi-fi hot spots are becoming commonplace in addition to computer lounges, while computer labs with technicians and classes and online courses and activities are expected on the lifelong learning front.”

Continue reading 5 Key Trends for Senior Living Investors, Developers and Operators via Senior Housing News

Good News on Latest 10yr Treasury, Apartment Building Loan Rates and Spread Chart

In more good news for apartment building investors, both the 10 year Treasury and apartment loan rates have moderated since the Fed’s “non-taper” announcement in mid-September. The spread between the T10 and the 10 year apartment loan rate we track has come in as well. Since 9/16 the Treasury has drifted down from 2.88% to yesterday’s quote of 2.53% while the loan rate has moved from 5.282 down to 4.921, bringing the spread in to 2.381 from 2.402. The average spread for 2013 has also narrowed to 2.573%:

Notes about the apartment Continue reading Good News on Latest 10yr Treasury, Apartment Building Loan Rates and Spread Chart

Show Me The Apartment Building Investment Markets, part II. (Skate to where the puck is going)

Just after I hit Publish on the top markets for population and job growth piece called: Skate to where the apartment building investment puck is going I found a great Richard Florida Atlantic piece for this month’s edition called The Boom Towns and Ghost Towns of the New Economy looking into the changes of fortune for US markets since the crash five years ago.

The recovery has been good (What crash? good in a few) in some areas, seemingly non-existent in others and in many a slow grinding process that has yet been unable to return to pre-crash levels. The first thing that everyone should look at is job growth but Florida looked deeper into High Wage growth around the country:

High wage growth for apartment markets. More at www.ashworthpartners.com — Click for full size image. Source: Atlantic Online.

And then looking forward into Continue reading Show Me The Apartment Building Investment Markets, part II. (Skate to where the puck is going)

Apartment investors and residents big winners in office building repurposing. – chart

In many top US markets the supply of office space has not just been stagnant, it’s actually been shrinking and apartment building investors have been the beneficiaries.

In a CoStar piece out today entitled Didn’t That Used to Be an Office Building? they list a couple big advantages of converting office space to apartments: Office working residents are close to work, and there’s great access to public transportation. How many people who spend hours a day sitting on the freeway would like the option to park the car all week?

If you combine the residential and mixed use portions of the chart below, 56% of the office conversions/demolitions are going to apartments:

An interesting fact Continue reading Apartment investors and residents big winners in office building repurposing. – chart

Skate to where the apartment building investment puck is going: Top US markets for future population and job growth.

A lot of the usual suspects when it comes to multifamily markets have moved pretty far into their cycles and if your home area is like ours ti’s getting pretty fully priced. With our value investor mindset that means we’re looking for the next markets to do well over the coming 10-20 years. As apartment building investors we say:

Fortunately two different sources provided data and maps to answer Jerry’s demand. The first is from the NAHB (the National Association of Home Builders) in an Eye On Housing piece called Uneven Aging. The report actually has two maps, the first showing the 2000 to 2010 growth in the Continue reading Skate to where the apartment building investment puck is going: Top US markets for future population and job growth.

Apartment Building Loan Rates Rise as 10yr Treasury jumps 31bp in Ten Days

After two weeks of holding at 5.068% the apartment loan rate we track rose to 5.274%, pushed higher by the 10yr Treasury moving up 31 basis points in the last week and a half. The spread between the two remained below the 2013 average of 2.628, coming in at 2.394:

This means that the monthly payment on a $1,000,000 apartment building investment loan with 30 year amortization would rise from Continue reading Apartment Building Loan Rates Rise as 10yr Treasury jumps 31bp in Ten Days