6A — August 15 - 28, 2014 — M id A tlantic

Real Estate Journal


M ultifamily F inancing

By George Johnson, Rittenhouse Capital Advisors Multifamily finance – The playing field is full again


s we move towards 2015, the multifamily financing landscape

swing and life companies are in the market selectively. So, indeed the playing the field is full again. How will the apartment finance mar- ket continue to evolve and what will we see in 2015 and beyond? Presently, competi- tion is heated amongst bank balance sheet lenders who are “buying” multifamily business to fatten their loan portfolios with aggressive 5 and 7-year debt, with flexible prepayment structures and made on a non- recourse basis. CMBS is back, as well as the return of interest only and

mezzanine debt in the capital stack. The product is slowly adapting and has made some

spreads down making CMBS a more compelling interest rate play.

sleeper. Notoriously selective, there are life company lenders in the market funding long- term, fixed-rate, non-recourse multifamily debt at 75% le- verage, in core and second- ary, tertiary markets as well. For those with a multifamily development project nearing completion or a stabilized building that is held up from refinancing by another 6-12 months of yield maintenance or defeasance, a long-term rate lock could be a great solution to taking interest rate risk off the table. It is one of best features offered by a handful of life company players today. Given the full recovery stage of the current multifamily markets in this region, the dearth of available stabilized assets has spurred signifi- cant redevelopment and new construction. Banks seem to be maintaining reasonable discipline on leverage with the norm being 70% LTC. Market wide, lenders are watching the supply-demand fundamentals closely. I wouldn’t be surprised to see the construction loan spigot turned off or down sig- nificantly in 2015. There is a consensus that we are in a rising rate envi- ronment and borrowers are looking to fix debt for the long term. The housing market will be a factor again in a few years and will surely impact rent growth. The most prudent lenders factor this, as well as other market influences, into their analysis and stress test underwriting. I feel strongly that we will see consolidation in the banking industry, as we’ve seen in prior cycles, as well as in the CMBS industry. There are simply too many banks out there and undoubt- edly too many CMBS lenders. For now, and moving into 2015, there are plenty of op- tions for most any multifam- ily project that is well located and with good sponsorship. It is and should continue to be a “borrowers market” for some time, particularly in the ma- jor metros of the Mid-Atlantic region with solid infill markets and high barriers to entry. George Johnson is the president and CEO of RCA. He has been in the commer- cial real estate financing industry for over 30 years. Throughout his career, he has been directly respon- sible for loan production approaching $1B. n

is as interest- ing as ever. The four pri- mary players are agencies, banks, CMBS lenders & life c ompan i es . A s o f 2 Q 2014, agen-

“For now, and moving into 2015, there are plenty of options for most any multifamily project that is well located and with good sponsorship.”

tangible adjustments. Lenders are now holding the “B” pieces and retaining servicing. The next run will be driven after the current lenders consoli- date, the stock market levels off and the “buy side” of the paper, in search of yield, drives

Agencies are still active and hungry with some great features however, there still seems to be reticence to the agency process and general concern over their tighter un- derwriting approach. Life companies are the

George Johnson

cies are still hungry for deals despite the mandated volume reduction, bank balance sheet lenders have re-entered the fray, CMBS 2.0x is back in full

Multi-Family • Office • Retail • Hospitality • Healthcare • Student & Senior Apartments • Industrial • Mixed-Use and More

Rittenhouse Capital Advisors’ sole focus is on placing debt & equity for commerical real estate inves- tors, whether they are purchasing a new asset or refinancing. We leverage our extensive lender relation- ships developed over 40 years in the banking industry, most as a direct lender. As such, we can speak “Banker to Banker” to the ultimate source of capital for your project.


Agency Lenders:

Securitized Lending:

Other Sources: • Private Equity • Mezzanine Funds • Non-Bank Lenders • Life Companies

• Local Banks

• Fannie Mae • Freddie Mac

• CMBS Lenders

• Regional Banks

• Money Center Banks


George Johnson President & CEO george@rittenhousecapital.com

Eric Vogel Senior Underwriter eric@rittenhousecapital.com

ph. (215) 989-4443 c. (267) 218-4411

ph. (215) 454-2908 c. (610) 585-1671

For more information, visit www.RittenhouseCapital.com or call (215) 989-4443

Made with FlippingBook - Online magazine maker