State of the Philadelphia Real Estate Market:
Assessing the Capital Markets in a Rising Rate Environment
October 30, 2018– Philadelphia, PA – As the U.S. economy continues to improve, the Federal Reserve has raised short-term interest rates three times so far in 2018. With continued growth, low unemployment, and an upgraded economic outlook, it is believed that the Fed will continue to raise rates in the near future. This decision has affected many aspects of the economy, and it has had a profound effect on the outlook of owners and developers of commercial real estate, as well as the lenders who finance their projects.
As a result of rising interest rates, and in anticipation of them rising further, Haverford Capital Management, Inc. (“HavCap”) has seen several changes in the real estate lending environment in the Greater Philadelphia Area. Here are some of our observations:
- Lenders who were actively originating construction loans during the past few years are now very interested in offsetting an anticipated runoff of these loans by replacing them with loans secured by stabilized, income-producing properties.
As a result, there is a particular interest from lenders when it comes to originating loans in the $1,000,000 – $10,000,000 range for stabilized multi-family, mixed-use, office, warehouse, and retail properties.
- HavCap has observed through recent transactions that lenders are willing to try to win new loan business by offering, in the case of multi-family loans, a variety of competitive incentives, including: sub-5.00% p.a. fixed rates combined with 5-year terms,DSCR’s less than 1.20x, LTV’s of 75%-80%, amortization periods of 25 or 30 years, and reduced origination fees.
By way of example, a recent loan request on behalf of one of HavCap’s clients to refinance two stabilized brownstone properties in Philadelphia generated eight (8) competitive loan proposals in a matter of days.
To learn more insights about the current lending climate in Philadelphia, and to understand how Haverford Capital Management, Inc. can help you with your commercial financing needs, please contact David Spoont at (215)-901-4198 / David.Spoont@HavCap.com.
6 Reasons to Hire a Commercial Real Estate Mortgage Broker
Commercial real estate (CRE) mortgage brokers are financial intermediaries who negotiate on a property owner’s and/or developer’s behalf with prospective lenders. In addition to arranging the debt portion of a project’s capital stack, a CRE mortgage broker can advise on the amount of debt available for acquisitions, development, capital improvements, and in the case of a re-financing, “cash out.”
Here are six additional reasons to hire a CRE mortgage broker:
1) Ability to leverage CRE capital markets expertise
CRE mortgage brokers have their “ear to the ground” and are aware of lenders who have loan dollars available for the type of loan you are seeking. Experienced CRE mortgage brokers are able to handle the full range of CRE categories including multi-family, single-family residences (SFRs), mixed-use, office, land, retail, industrial, hospitality, NNN, and self-storage. An experienced CRE mortgage broker will add value to your lender negotiations, because of their market rate knowledge of loan terms, i.e. % LTV, % LTC, interest rates, term lengths, amortization and DSCR requirements, etc.
CRE mortgage brokers with backgrounds in finance, lending, and ownership or operation of commercial real estate have the advantage of understanding loan negotiations from the perspective of both the borrower and the lender.
2) Access to an extensive lender network
Another advantage of hiring a CRE mortgage broker is that they will likely be well-connected within the CRE world. Their networking efforts should result in an active database of prospective lenders including community, regional, national, and international banks, credit unions, life insurance companies, and non-traditional providers of debt capital.
Many CRE brokers have established relationships with senior bankers, allowing them to speak candidly about your borrowing needs.
In addition, a knowledgeable CRE broker will also have a network of professionals involved in different aspects of CRE, including attorneys, appraisers, environmental experts, real estate brokers, surveyors, and title insurance companies.
3) Generates competition for your business
Although you may already have existing relationships with certain lenders, employing a CRE mortgage broker can keep these lenders on their toes by guaranteeing that you are being offered the best available terms, while preserving the goodwill you have established in your relationships. A mortgage broker’s relationships will assure you that you are receiving the best available market terms.
4) Problem solving capabilities
Hiring a CRE mortgage broker allows you to have an experienced real estate professional view your entire operation with fresh eyes. A knowledgeable broker might be able to provide ideas and solutions to lending issues that you were not able to tackle by yourself, or have insight into other industry trends.
5) Allows clients to focus on day-to-day operations and other income generating activities
Hiring a CRE mortgage broker will shift the work involved in arranging a loan to a third party, freeing up your time for income producing opportunities. The CRE mortgage broker should be able to handle assembling the lender loan submission package, questions from lenders and third party report professionals and coordinate all loan closing requirements, including title and loan documentation, allowing you to devote your time to the day-to- day operations of your business.
6) A smart investment
The savings realized from hiring a CRE mortgage broker are often greater than the cost of their services, due to their ability to obtain favorable loan terms and free up your time to focus on income producing endeavors.
Haverford Capital Management, Inc. is a commercial real estate brokerage firm specializing in mortgage brokerage and disposition advisory services.
For more information, please call: David Spoont – (215) 901-4198