“Rates are historically low, but who’s lending?”
Despite uncertainty and volatility earlier this year, the capital markets are relatively stable and healthier than originally anticipated at the beginning of the pandemic.
There are ample capital sources available and sectors such as the CMBS market that were most impacted earlier in the pandemic have returned. Several banks and credit unions have begun looking at new lending business again.
Most lenders continue to be much more conservative with lower proceeds, higher reserve requirements, and continued focus on sponsors’ historical performance and track records. Financing for hotels, retail, and even some office remains challenging.
Agency Perm Loans - Conventional (Fannie/Freddie)The Short Plenty of liquidity. Pricing at historic lows. Limits on cash-out refi with some exceptions. Strength of sponsorship is critical. Because of Covid, high debt service, tax and, insurance reserve requirements (6 to 18 months) with some exceptions. Our Recent Activity In October 2020 RARE CRE closed a $10M refi on a townhome rental property in Palm Beach County at 2.80%, 10-yr term, 5-year IO @ 65% LTV For a menu of rates, see our most recent Capital Markets Update
Agency Perm Loans - Small Balance (Fannie/Freddie)The Short Similar to Conventional Agency with a bit wider spread on pricing. Loans $6M and under. Our Recent Activity RARE CRE is in the process of closing a $2M refi on a Class C 12-unit apartment property in Palm Beach County at 3.15%, 5-year term, 3-year IO For a menu of rates, see our most recent Capital Markets Update
LifeCo Perm LoansThe Short LifeCos compete with Agency on certain situations (larger/institutional assets). Often, lower LTV with optional prepayment, longer terms, and competitive pricing. Post-Covid LifeCos are underwriting much more conservatively. Strength of borrower's balance sheet more important than ever. Our Recent Activity RARE CRE quoted a $25M loan at 65% LTV, 30-year self-liquidating term, at 3.10%, and built-in prepayment in October 2020 For a menu of rates, see our most recent Capital Markets Update
Bridge Loans & Preferred Equity (Non-Recourse)The Short Readily available for value-add acquisitions. Balance sheet lenders providing up to 85% LTC. CLO-driven lenders were mostly sidelined early in the year but coming back following new issuances. Rates starting at L+4.25%. Our Recent Activity RARE CRE is currently working on a $12M bridge loan for the acquisition of a moderate value-add 95 unit Class B multifamily property in Southeast Florida. Recently quoted as low as L+3.75%, 1pt in, ½ out, 3-yr term, 80% LTC
Joint-Venture Equity - Value-add and DevelopmentThe Short Our private equity, family office, and life insurance affiliates are actively looking to partner with experienced developers and operators in Florida on value-add and development projects. Our Recent Activity RARE CRE recently quoted terms from a LifeCo, on a value-add Class B acquisition as follows: $15M (95% Lifeco / 5% Sponsor), 7% pref, 15% IRR target, max leverage 65% LTC
Construction Loans - HUD 221(d)(4)The Short The best construction-to-perm option in the market, contingent on project and sponsor qualification. Rates at sub-3%. Realistically expect a 6-9 month process start to finish. Up to 40-year term and ability to lock in your rate at construction. Our Recent Activity RARE CRE is actively processing a 400-unit garden-style project in the Treasure Coast. Sponsor's lack of experience with HUD/FHA was supplemented by HUD-experienced design, engineering, and GC teams.
Construction Loans - Bank/Credit Union/LifeCo (Recourse)The Short Regional/Community banks, Credit Unions, and Life Insurance Co’s are much more active than in the first half of the year (2020). Equity requirements are still higher than pre-Covid; think 60% LTC, but lots of appetite for Multifamily, Industrial, and Self-Storage. RARE CRE has negotiated recourse burn-offs at set milestones for several borrowers. Our Recent Activity RARE CRE is actively advising on a 300-unit mid-rise project in Broward County and a 500+ unit garden-style development in Miami-Dade. RARE CRE has quoted rates from 3.75% at 60% LTC to L+6.75% at 80% LTC.
Construction Loans - Private Debt Funds (Non-Recourse)The Short High single-digit to low double-digit pricing. Fees of one to two points. LTC is not constrained by % of cost, but by stabilized DSCR and debt yield. In the recent past, we have arranged terms for proceeds as high as 85% LTC and over 90% LTC with equity participation. Our Recent Activity In addition to the usual non-bank lenders we work with, RARE CRE is originating loans for two groups from out-of-state who have recently opened up a Florida presence and are aggressively seeking to lend on multifamily development projects.
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