How Deals Are Getting Done In Orange County’s Hot Multifamily Market
Consistent rent growth and nearly 100% occupancy have made Orange County’s multifamily market white hot, with investors competing for a relatively few apartment assets that come to market. That's why we're excited to have Bellwether Enterprise’s SVP Jason Krupoff among our all-star cast of presenters at Bisnow's Orange County State of the Market event this Thursday at 2600 Michelson Dr in Irvine.
“Local, national and foreign investors of all types want to be here," says Jason (pictured here with his wife, Jennifer, and their 16-month-old daughter, Kendall).
“Having grown up in OC, and working here for the last 17 years, this is the most aggressive multifamily market I’ve ever seen,” says Jason, who’s located in the Irvine office of this national commercial and multifamily mortgage banking company. It’s a seller's market, and sellers are demanding aggressive terms, including low cap rates, tight due diligence timelines, quick closings and large, non-refundable deposits early in the process, he says. “When investors have a half-million dollars or more at risk, they want to know they have their equity lined up and the debt financing secured,” he stresses.
“We are basically a one-stop shop for our borrowers. We provide hands-on customer service, a detailed knowledge of the local apartment market, and the ability to ‘clear the market' for borrowers, as we represent a wide range of mortgage capital providers to ensure our clients get the best deal,” Jason continues. He tells us Bellwether has direct access to all types of capital sources—insurance companies, Fannie Mae, Freddie Mac, FHA and banks—and can provide clients with short, intermediate and long-term loan programs to meet their needs, whether value-add, bridge or fixed mortgages.
Jason says there’s lots of capital available for acquisition of existing assets, value-add strategies and refi’s, which are the majority of Bellwether’s business. A lot of foreign capital is being invested in SoCal real estate, Jason notes. “Chinese buyers are trying to find a safe haven in California real estate investments for their capital due to uncertainty in the global economy.”
Jason says multifamily construction loans are priced at Libor plus 200 basis points, and long-term, 10-year fixed rates range from 3.5% to 4.5%, with a 80% maximum loan-to-value, but 65% to 75% is most achievable. It’s difficult achieving max leverage on acquisitions in this market, because cap rates are so low, Jason tells us. Typical buyers are putting 25% to 35% cash equity down, but value-add loan programs, and mezzanine financing can help a borrower increase leverage, he says.
Jason says we're in the seventh inning of this real estate cycle. But he qualifies his response. While investors are trying to make sense of the stock market and greater economy, they are still aggressively pursuing multifamily investments, he tells us. The 10-year Treasury is under 2% at 1.6%, or 160 basis points.
Everyone thought rates were going up, but they've gone down in the past few months, with fixed interest rates hitting lows last seen in 2012 or early 2013, Jason says.
Hear more from Jason and other SoCal industry experts at Bisnow's Orange County State of the Market event on Thursday on the 15th floor at 2600 Michelson Dr in Irvine, beginning with breakfast and networking at 7:30am. Sign up here!