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Jonny Soleimani of PSRS moderated a Los Angeles Mortgage Association (LAMA) Luncheon last week where panelists discussed current opportunities in multifamily lending and the state of the overall market.
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Fed Prime Rate: 7.00%
5-Year Swap Rate: 3.98%
10-Year Swap Rate: 3.74%
30-Year Swap Rate: 3.45%
5-Year Treasury: 3.83%
10-Year Treasury: 3.67%
20-Year Treasury: 4.03%
30-Year Treasury: 3.85%
Key Takeaways from the Los Angeles Mortgage Association Luncheon last week
Jonny Soleimani of PSRS moderated a Los Angeles Mortgage Association (LAMA) Luncheon last week where panelists discussed current opportunities in multifamily lending and the state of the overall market. Below are a few of the key takeaways that Jonny recorded from the event:
Were rates discussed during this luncheon, and if so, how are we seeing these higher interest rates affect the commercial real estate market?
Rates were discussed during the luncheon on a macro level. We had speakers from different segments of the lending market – agency, PACE, construction, etc. Beyond the consensus that rates will tick moderately higher in the near future, lenders in general are becoming more conservative. This includes lending at lower LTVs and requiring stronger borrowers. However, there is still an opportunity for each lender going forward. For example, on the construction side, the cost of some materials such as wood has dropped precipitously from a March 2022 high of $1,400 per 1,000 board feet to a low of around $400 per 1,000 board feet. I don’t know if anyone is claiming a correlation/causation relationship to the treasury which generally began skyrocketing around the same time. Nevertheless, developers are....Click here to read more
How are lenders currently pricing multifamily? Has there been a rise in the level of competition in this asset class?
Construction has been dialed back a bit from the 70%-75% LTC range to 65%, maybe 70% LTC on the bank side. Lenders in general will usually price a spread over WSJ Prime, SOFR, or another index, currently resulting in a rate in the high 7’s–low 8’s. In general, stabilized multifamily is priced between 150-170 basis points over the 10-year (for those priced over the treasury) on a low-leverage deal, and closer to 180-200 basis points over the treasury for a moderately-levered deal. There are lenders that price much higher than this but offer their borrowers something in return that a lender priced lower may not offer, such as non-recourse or a flexible prepayment penalty. Those priced over the 5-year treasury quote similar spreads....Click here to read more
Were there any other takeaways from this LAMA Luncheon?
Everyone is very quick to jump to conclusions in what they consider a “doom and gloom” market. Yes, rates have gone up and transaction volume has slowed down. However, there is opportunity in every market and contrary to those who took out high-interest rate and/or variable rate loans and “added value” by borrowing cheap money, there are those on the other side of the coin that remained patient whether they transacted or not by sticking to the fundamentals. Those that have capital and can close all cash will probably have ample opportunity in the next year as many deals that don’t work anymore come on the market at....Click here to read more

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