| Money for stabilized multifamily assets is now very inexpensive—permanent mortgage rates are as low as 3.5% for a five-year, fixed-rate deal and 4.25% for 10 years, say CBRE Capital Markets' Aaron Appel, Max Herzog (above), and Spencer Levy (below). They recently financed two apartment buildings in Suffolk County, Long Island, through CBRE's Fannie Mae lending group and were able to arrange a 4.75%, 10-year interest-only mortgage. Life companies are bidding at rates better than Freddie and Fannie, they say, while state and regional banks are much more aggressive, though with slightly higher rates. This is a big change from even 3-6 months ago, when pricing was in the mid-5s. With the economy maintaining the status quo, rates will remain low. In a few years, we might see some sort of inflation, they say. |
| For ground-up residential rentals, there are a handful of lenders willing to make 65-75% LTC (loan-to-cost)—but a great sponsor and the right location is needed. We'll continue to see lenders get more comfortable with rehab and rental projects, too. On the equity side, there's a tremendous amount of cash chasing multifamily, which is benefiting from a stabilizing economy and near-term improvement in fundamentals, adds Spencer. NYC vacancy rates are under 2%, and concessions are gone—expect an uptick in rents for well-maintained properties. And any institutional equity investors, specifically in rental apartments, are lowering return thresholds, and we're seeing developers build into cap rates in the 7-8% range rather than the double digits, they say. Otherwise, many stabilized properties have traded as low as a 4% cap. These investors are looking at multifamily as a bond asset, safer than the US Treasury. |
Get 'Em While They're Hot
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Related Topics:
Aaron Appel
, CBRE Capital Markets
, Max Herzog
, Spencer Levy
, Suffolk County
, US Treasury
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