Top Takeaways: GlobeSt. Fall 2022 Multifamily
The GlobeSt. Fall 2022 Multifamily conference was held last week at JW Live Marriott Hotel in Los Angeles, California. Industry experts in the fields of debt, capital sourcing, syndications, and more came together to give their insight into the state of the market.
The following are Slatt Capital’s key takeaways:
- Multifamily properties are widely considered the most sought-after asset by investors.
- The rise in interest rates is making it difficult for lenders to achieve higher LTVs.
- Debt funds are scaling back on max leverage requests and are starting to underwrite to a refinance exit rather than a sale exit plan.
- Debt funds are also using ‘in place’ cash flow metrics rather than proforma market rents in their underwriting due to the possible flattening of future rent growth.
- Conventional financing options are still relevant but at lower LTVs.
- Where you may have been able to push for 60% LTV in core areas, you are now seeing a 50-55%.
- Many conventional lenders are only offering short-term 5 or 7-year fixed financing loans, leaving 10-year fixed loans off the table for now.
- Bridge to Bridge was a key discussion topic.
- Experts weighed in that loans made in 2019, 2020, and 2021 may face some trouble if the sponsors did not underwrite to higher interest rates on their refinance exit. This presents the opportunity for bridge lenders, who are well-capitalized, to come in and bridge out existing loans
The overall theme of the conference was that many lenders and capital providers are trying to catch a falling knife; conveying that the current state of the market is too volatile to pin exactly where things are going. The only thing we know for certain is where things are right now, and how we adapt to this shifting market.
Something important to consider is that commercial mortgage bankers’ access to debt and capital providers will be instrumental in navigating this unpredictable market going forward.