Why Seattle's Not Worried About Interest Rates
Now that an interest rate increase is dead ahead, there are concerns over the availability of capital. Luckily for those wise enough to play in a market as hot as Seattle, that probably won't be a problem at all.
HFF senior managing director Bruce Ganong tells us debt capital markets are flush with capital, especially for cash-flowing assets with a compelling value-add story. "Ample liquidity in the floating-rate sector is being provided by commercial banks, life companies, and alternative sources such as debt funds and finance companies," he says. Bruce thinks an increase in interest rates shouldn't have any adverse impact on the supply of capital, particularly in the floating-rate space.
Competition for high-quality transactions with strong sponsorship in a market with good fundamentals like Seattle remains strong and there will be more of the same in 2016, Bruce adds. Recently HFF arranged $38.8M in acquisition financing for the 539k SF SeaTac Office Center, an office complex adjacent to SeaTac International Airport that Bruce calls an example of a "compelling value-add story." Urban Renaissance Group and Iron Point Partners acquired the property, which is 63% occupied.
The forecast is so positive that Berkadia managing director Louis Weisman tells us he expects multifamily capital to be available in 2016 at similar or greater levels than in '15. "Fannie Mae and Freddie Mac both have similar production goals in 2016 compared to this year," he says. This year, agency funding will approach $80B across all product lines, making this one of the most productive years on record.
Louis says the GSE product offering will include immediate funding for refi or acquisition, newly completed deals in lease-up, value-add scenarios, and an array of affordable programs for assets utilizing Low Income Housing Tax Credits and Tax Exempt bonds. "Besides multifamily, the GSEs will have a continued appetite for healthcare and manufactured housing transactions. FHA/HUD, now completing the nationwide transformation of its production model, will fund both the refinance and new construction of multifamily and healthcare assets on a long-term fully amortizing basis."