You miss 100 percent of the shots you never take, and if you think it’s expensive to hire a professional to do the job, wait until you hire an amateur. FOR OVER 20 YEARS, I HAVE WORKED EXTENSIVELY WITH OWNERS AND BUYERS IN LAND, COMMERCIAL AND INVESTMENT REAL ESTATE IN PHOENIX, TUCSON AND THROUGHOUT ARIZONA. PLEASE LET ME KNOW HOW I CAN HELP YOU. Call me if you want to sell your property and need an estimated value. Phone / Prefer cell: 520-975-5207
Office: 480-948-5554 or email me walterunger@ccim.net. – What is a CCIM.
In Business and in Life you don’t get what you deserve, you get what you Negotiate.
contact me if you want me to get you the value of your property.
CLICK HERE TO VIEW ALL MY LISTINGS.
Are you ready to sell or purchase your Land or Commercial Building in Phoenix, Scottsdale, Maricopa County and Pinal County, Arizona, please call me?
Walter Unger CCIM – cell: 520-975-5207 – walterunger@ccim.net
CoStar News By Richard Lawson and Mark Heschmeyer
June 6, 2023 | 12:37 P.M.
FIRMS ANGLE FOR LARGER SHARE OF DECLINING BUSINESS FOR LOANS
Alternative lenders could end up carving out a bigger niche among apartment owners as traditional bank routes have narrowed for refinancing loans.
This year, $27.9 billion in apartment debt is set to mature, according to debt rating firm Morningstar, including loans through government agencies Freddie Mac and Fannie Mae, private lenders and multifamily commercial mortgage-backed securities. It’s a topic of discussion for the rental housing industry as owners and investors gather this week in Atlanta for the National Apartment Association’s Apartmentalize conference.
Soaring interest rates last year sent the cost of borrowing money higher. Slowing rent growth combined with fears of a recession sent banks into belt-tightening mode.
With less to lend, borrowers are having to rely on, or put up much more of, their own capital to complete a refinancing. The combination means investors have less capital for acquisitions, renovations and possibly a smaller return to their investors.
“It’s extremely common” when lending markets tighten for lenders to require more equity in refinancing, Daniel Jacobs, managing partner with Atlanta-based private equity firm ACRE, told CoStar News. “It’s the reality of the market.”
His firm recently refinanced a construction loan Washington, D.C.-based MED Developers used in building The Lowe, a 135-unit apartment property in Savannah, Georgia, that opened in March. A $26.5 million deal replaced a $24 million loan given in 2021 that was set to mature in September, according to Chatham County property records.
Liquidity Shortage
Private lenders are taking advantage of the liquidity shortage in the broader debt markets. “The banking system is essentially closed,” Toby Cobb, managing partner and co-founder of Miami-based private lender 3650 REIT, told CoStar News.
Cobb said the lion’s share of the challenges in the banking industry financing are tied to the fallout from the failures of Silicon Valley Bank and First Republic this year. In response, big banks have become “super conservative” to whom they lend, he said.
The Mortgage Bankers Association reported in its commercial real estate lending forecast May 16 that overall lending is expected to drop from $816 billion last year to $654 billion this year, representing a 20% decline. Multifamily lending is forecast to drop 14% this year to $375 billion from last year’s $437 billion.
Cobb said that alternative private lenders with investors including pension funds and insurance companies have capital to lend and will “become a much bigger source of capital.” But he said they are a long way from cutting deeply into lending from big banks, which make about 65% of all commercial real estate loans. Private lenders have about 5% to 6% of the lending market.
Cobb’s company, 3650 REIT, has had a busy few months despite the challenges in the broader lending market. The private real estate investment trust provided a $58 million loan to refinance Brookview Commons in Danbury, Connecticut, and closed a $103 million loan joint venture between sponsors David Werner Investments and Onyx Partners that recapitalized 12 properties spread across Louisiana, South Carolina, Georgia and Tennessee.
Cost of Debt
Lending began trailing off in the back half of last year when the Federal Reserve pushed interest rates up quickly.
Freddie Mac’s $35.7 billion in 10-year loans originated in 2018 had an average interest rate of 4.646% and a loan-to-value ratio of 66.8% in 2018, according to Freddie Mac data. Similar loans on properties valued at $8.5 billion and securitized this year carry an average interest rate of 6.012%.
Loans through private lenders tend to run 3.5 to 4.5 percentage points higher than the secured overnight financing rate, known as SOFR, which has been running at about 5.06%, said Jacobs with private equity firm ACRE.
Borrowers received loan amounts totaling $3.5 billion, a less than 50% loan-to-value ratio, according to Freddie Mac data. If these loans were underwritten at 2018 figures, borrowers could have received up to $5.7 billion. That totals out to borrowers having $2.2 billion more of their own capital locked up in their properties than they would have had at 2018 underwriting levels.
Their loan proceeds this year are costing them $47.8 million more per year at today’s interest rate over that of 2018, according to Freddie Mac data.
The change in lending conditions has grown even as pandemic disruptions started fading last year and the Federal Reserve started marching borrowing rates higher and higher each month.
“During the first quarter of last year there was a lot of competition in the market from multiple capital sources,” TJ Edwards, chief production officer of multifamily finance at Walker & Dunlop, told CoStar News in an email. “This resulted in a very competitive market for both Freddie Mac and Fannie Mae. Also, interest rates were more stable and floating rate debt was more attractive.”
Effect of Higher Rates
ACRE’s Jacobs said that “when interest rates were near zero, people pushed the leverage to the limits.”
The first quarter of this year was an entirely different economic environment with a lot of market uncertainty, and “refinance and acquisition volumes” slowing down compared to the first quarter last year, Edwards said.
Because of higher interest rates, slow multifamily rent growth and increased expenses, deals are not getting sized to previous loan-to-value levels, Edwards said.
Some refinancing is resulting in cash-ins from borrowers. As a result, some are more hesitant to refinance, especially in scenarios where the net operating incomes don’t support cash-out proceeds.
“On floating rate deals, the increase in SOFR and replacement cap escrows has significantly impacted the ability for some sponsors to make distributions to investors or execute renovation plans,” Edwards said. SOFR is a broad measure of the cost of borrowing cash collateralized by U.S. Treasury securities.
“In other situations, the ability to refinance” with cash-out proceeds or to use supplemental financing to pay back equity or renovate an asset “is becoming more challenging,” he said.
FROM ME: FOR OVER 20 YEARS, I HAVE WORKED EXTENSIVELY WITH OWNERS AND BUYERS IN LAND, COMMERCIAL AND INVESTMENT REAL ESTATE IN PHOENIX, TUCSON AND THROUGHOUT ARIZONA. Now is the time, if you are thinking of selling or purchasing your Land or Commercial Building in Phoenix, Scottsdale, Maricopa County, Pinal County, Arizona / Office / Retail / Industrial / Multi-family / please call me on my cell 520-975-5207 or e-mail me walterunger@ccim.net. Investors and Owner / Users need to really know the market today before making a move. The market has a lot of moving parts. What is going on socio-economically, what is going on demographically, what is going on with location, with competing businesses, with public policy in general — all of these things affect the quality of selling or purchasing your Commercial Properties, Commercial Investment Properties and Commercial and large tracts of Residential Land Therefore, you need a broker, a CCIM (Certified Commercial Investment Member) who is a recognized expert in the commercial and investment real estate industry and who understands your needs. I am marketing my listings on Costar, Loop-net, CCIM, CREXi, Catylist, and various other web sites. I also sold hundreds millions of dollars’ worth of Investment Properties / Owner User Properties in Retail, Office Industrial, Multi-family and Land in Arizona and therefore I am working with brokers, Investors and Developers. I am also a CCIM and through this origination ( www.ccim.com ) I have access to marketing not only in the United States, but also international
DISCOVER WHAT IS HAPPENING IN ARIZONA
History of Arizona from 900 BC – 2017 -Timeline.
What is a CCIM. In Business and in Life you don’t get what you deserve, you get what you Negotiate.
contact me if you want the me to get you the value of your property.
Walter Unger CCIM – cell: 520-975-5207 – walterunger@ccim.net
Click here to find out what is a CCIM:
CLICK HERE TO VIEW ALL MY LISTINGS.
Are you ready to sell or purchase your Land or Commercial Building in Phoenix, Scottsdale, Maricopa County and Pinal County, Arizona, please call me?
Walter Unger CCIM
Associate Broker
West USA Commercial Division
14350 N. 87th. Street, Suite 180
Scottsdale AZ, 85260
Phone: 480-948-5554
Cell: 520-975-5207
History of Arizona from 900 BC – 2017 -Timeline.
History of Arizona from 900 BC – 2017 -Timeline.
WHY PHOENIX? AMAZING!!! POPULATION IN 1950 – 350 K PEOPLE; “NOW 5 MIL”. – “5TH. BIGGEST CITY IN USA”
- DEMOGRAPHIC FACTS ABOUT MARICOPA COUNTY:
Walter Unger CCIM – walterunger@ccim.net – 1-520-975-5207 – http://walter-unger.com
Timeline of Phoenix, Arizona history
Facts of Arizona – year 1848 to 2013
CLICK HERE: Arizona Opportunity Zones As We Understand /maps. Interested!!! Please contact me.
Feel free to contact Walter regarding any of these stories, the current market, distressed commercial real estate opportunities and needs, your property or your Investment Needs for Comercial Properties in Phoenix, Tucson, Arizona.
Walter Unger CCIM
Associate Broker
West USA Commercial Division
14350 N. 87th. Street, Suite 180
Scottsdale AZ, 85260
Phone: 480-948-5554
Cell: 520-975-5207
FOR OVER 20 YEARS, I HAVE WORKED EXTENSIVELY WITH OWNERS AND BUYERS IN LAND, COMMERCIAL AND INVESTMENT REAL ESTATE IN PHOENIX, TUCSON AND THROUGHOUT ARIZONA. PLEASE LET ME KNOW HOW I CAN HELP YOU PLEASE CALL ME
CLICK HERE TO VIEW ALL MY LISTINGS.
Also Call me if you need an estimated value of your Property.
Call me if you want to see a map with what is in the Construction Pipeline for Apartments.
Prefer cell: 520-975-5207, or email me walterunger@ccim.net. CLICK HERE TO VIEW ALL MY LISTINGS.
Check out my professional profile and connect with me on LinkedIn.
Walter Unger CCIM, CCSS, CCLS
I am a successful Commercial / Investment Real Estate Broker in Arizona now for 20 years. If you have any questions about Commercial / Investment Properties in Phoenix or Commercial / Investment Properties in Arizona, I will gladly sit down with you and share my expertise and my professional opinion with you. I am also in this to make money therefore it will be a win-win situation for all of us.
Please reply by e-mail walterunger@ccim.net or call me on my cell 520-975-5207
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