Real Estate Journal — Multifamily Financing — August 9 - 22, 2019 — 15A
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M id A tlantic
Multifamily Financing
By George Johnson, Rittenhouse Capital Advisors Multi-Family Financing 2019- The Top of the Market
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for multifamily financing while Banks, the agencies (FNMA, FRMC) and debt funds are the prevailing top options. The debt funds have proven to be a factor in the market given their ability to offer higher leverage at up to 85% loan to cost. The debt fund op- tion comes with a trade off in the form of a higher interest rate, typically 200-400 basis points over Bank rates. The debt funds can be more aggres- sive on leverage as they are not regulated like the banks who are under the watch of the Fed and have to be mindful of “over
weighting” in the multifamily loan bucket while also keeping development loans below the HVCRE threshold. Interest rates have been a story. Amazingly, the interest rate environment took a U- turn several months back and borrowing rates have fallen 75+ basis points. Given the Fed’s recent rate cut, it seems like this may be status quo for the foreseeable future. Even before the rate cut, we have seen more lenders offering long-term fixed rate loans on a “swap basis“. We’ve also seen developers taking traditional
floating rate debt and buy- ing a relatively inexpensive interest-rate cap. Both of these approaches take interest rate risk off the table and lock into still historically low interest rates. These approaches also allow lenders to underwrite the pro forma to the interest rate in-place as opposed to the alternative of forecasting where rates will be in 2-3 years when a project stabilizes and is ready for permanent debt. Typically this helps the lender to offer a higher level of loan proceeds. Financing for existing, sta-
bilized assets (or even a value- add play) in the market is much simpler than financing a development project. Bank balance sheet lenders and the agencies are the strongest op- tions and remain aggressive. The agencies can still offer up to 80% leverage and typically a few years of interest only with rates in the 4% range. Banks will cap out at 75% leverage and offer rates over 5, 7 and 10 years ranging from 3.50%, 3.75% and 4% respectively. George Johnson is presi- dent & CEO of Rittenhouse Capital Advisors.
fter several years of a straight up trajec- tory in the multi-family
market, we are and have been at the top for some- t ime n ow . Lenders are maintaining d i s c i p l i n e g i v e n t h e current sup-
George Johnson
ply-demand fundamentals as well as concerns over the econ- omy in general. A key piece of that consideration is that there are ~10,000 units currently under construction or planned in the Philadelphia region and targeted for delivery through 2020-21. So far, the market has kept pace with new deliveries with net absorption at 1,500 units over T12. The pace of new supply though is facing head- winds from a cautious lending environment combined with increasing labor and material costs, making projects more difficult to underwrite for de- velopers and lenders. In spite of the lending industries cau- tion, there remains a multi- plicity of conventional lending options in the market. The composition of the lend- ing landscape has changed dramatically from 10 years ago when CMBS had its decade long, white-hot run which end- ed with the onset of the Great Recession. In today’s market, CMBS is usually the last option FCP and HREG sell 264-unit apt. community in Charleston, SC for $36.1 million CHARLESTON, SC — FCP and High Real Estate Group (HREG) announce the sale of Plantation Oaks, a 264- unit apartment community in Charleston to White Eagle Property Group for $36.1 million. FCP recapitalized Plantation Oaks in July 2015, becoming partners with High Real Estate Group in Planta- tion Oaks and a Charlotte, NC property, York Ridge, which was sold in May 2019, also to White Eagle Property Group. “White Eagle is excited to enter the Charleston market with the acquisition of Planta- tion Oaks,” said White Eagle Property Group Chairman and CEO, Jeff Weiskopf.
Sourcing the Best Financing for Your Real Estate Investments
Student Housing Philadelphia, PA $20M+ Refinance
Light Industrial/Office Delaware County, PA $2.89M Acquisition Funding
Mixed-Use Philadelphia, PA $3M+ Acquisition Funding
Multi- Family Bala Cynwyd, PA $27.6M Construction Loan
Office Building Chester County, PA $54M+ Acquisition Funding
196 Unit Assisted Living Montgomery County, PA $30M Construction Loan
RCA Places Financing for the Full Range of Commercial Real Estate Assets: Multi-Family, Retail, Office, Industrial, Healthcare, Hospitality, Development $1,000,000 to $100,000,000+
George Johnson President & CEO george@rittenhousecapital.com
Joe Hanuscin Sr. Client Manager joe@rittenhousecapital.com
Andrew Beauchemin Business Development andrew@rittenhousecapital.com
James Grande Business Development james@rittenhousecapital.com
For information visit www.RittenhouseCapital.com or call (215) 454-2852
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