14A — August 12 - 25, 2016 — Financial Digest — Multifamily Financing — M id A tlantic

Real Estate Journal


M ultifamily F inancing

n the greater Mid-Atlan- tic Region, the multifam- ily real estate market is By George Johnson, Rittenhouse Capital Advisors Multifamily finance: The dynamics of a mature market. Where do we go from here? I sales transactions seems to have peaked, the demand side will be full of opportu- significant amount of debt was booked by regional bank balance sheet lenders, coming $30-$40-$50 Billion a year while the Banks continue to take a significant piece of the term interest only at leverage points at or below 65%.

The Bank side of the equa- tion is immersed in a period of hyper regulation and over- sight. The recent stress tests are exhibit A. Specific tomultifamily lend- ing, a few Banks in the region have indicated that they are “overweight” on multifam- ily debt, as cautioned by the Fed, and as such are seeking to book loans in other asset categories. We’ll see what transpires but for now, the level of regu- lation is providing at a mini- mum, a dampening effect on those lenders who have been aggressively lending post- crash. That said, as with most cycles, when one entrant exits, another steps in. We’re seeing some opportunistic balance sheet lenders step in now, offering 5 and 7-year balance sheet debt, for stabi- lized properties, in the low- mid 3%’s respectively. 3-year money can be had at 2.99%. Debt funds have come on the scene as well, in an effort to pick up the slack from the Banks. Insofar as development is concerned, I believe we are at or near the end of the devel- opment cycle. Deals are still getting done but cautiously and at lower leverage. Some banks are reserving their de- velopment dollars for known, existing clients. Additions to inventory in the market will taper off. There are many factors weighing on the Banks and the larger economy that will impact interest rates and the overall supply side. The next phase in the cycle will bring adjustments. Adjustment to rising interest rates, adjust- ments to underwriting and valuations. All will affect the buy-sell balance and the debt markets. With a lot of uncer- tainty out there, it may take some time for the market to find balance, but throughout, there should be no shortage of debt options available for strong, well-sponsored mul- tifamily properties. George Johnson has been in the commercial real estate financing in- dustry for over 30 years. Throughout his career, he has been directly respon- sible for loan production approaching $1B. n

through the full recovery phase in the cycle and, de- pending on sub-market, is at or near the heights a c h i e v e d prior to the

“With a lot of uncertainty out there, it may take some time for the market to find balance, but throughout, there should be no shortage of debt options available for strong, well- sponsored multifamily properties.” — George Johnson, Rittenhouse Capital Advisors

nity stemming from the large amount of Agency, CMBS and Bank balance sheet debt due to mature in 2017. In 2018, more debt maturi- ties will create acquisition or refinance opportunities as a

out of the recession in 2011- 2013, on a 5-7 year basis. In my opinion, there won’t be any seismic shift in the composition of multifamily lenders. The agencies will continue to crank out there

pie. CMBS will continue to be the home for lesser quality assets and in secondary mar- kets. A recent and interesting development though, in that arena, CMBS lenders are talking about offering full-

George Johnson

crash. Given that, what will the market for multifamily finance look like going for- ward? Although the velocity of

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