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You bet, totally fucking up several active dispositions we have going on.
Definitely, we had two buyers bail on a few deals we are currently selling. Ended up finding another buyer but the sale price is significantly lower than we were originally offered.
Both deals are newly stabilized multifamily assets with a total deal size of $50 MM (each), located in different markets in the SE.
more specifically, were these smaller deals ($5m) or something of decent size?
Thanks for the input guys. Would love to hear other stories.
You would think this "Trump Bump" would level off soon. It's not like earnings are better. I still feel that even if sweeping tax reform comes that we're still looking at some type of a recession in the next year. As rates go up things are going to change for a lot of sectors. If QE slows down too...
I had a client beat me up on Freddie Macs hard costs for a smallish portfolio refi. The LOI's were issued at 3.9% on 10yr fixed money. The lender said they would honor LOI's if signed in a day or two. Borrower balked at fees. My new LOI's...4.3%. Dude cost himself 30bps on 10mil in debt for the next 10yrs cause of some minor fees.
Too many times these guys step over a dollar to pick up a nickel
We just had a client almost blow up a great deal over a pissing contest with the lender about $2k in closing costs that they refused to pay. Absolute insanity.
Can't tell you how many Borrowers piss and moan about these "fees". Freddie's program has some of the cheapest fees I've ever seen and have absolutely no issue with cash out & I/O.
Idiotic Borrowers in my opinion. Serves your client right for bitching about that when he could have locked at 3.9%.
Get banged on.
Within 2 weeks of the announcement Trump had won, we saw 4 re-trades.
Although the rates spiking, and potentially with another spike in the upcoming weeks, many buyer's have froze and are deciding how to work with their capital. With the general consensus of not many transactions going to happen in the foreseeable future, I believe this could be a decent opportunity for people to transact before rates hit the 6% benchmark, and we could see a good amount of transactions in these next couple of months before everyone truly does cutback on buying. Just my 2 cents.
Is it affecting deals? Sure, however it is bringing things back to reality. This is nothing compared to what is going to happen when the bond market has its upcoming issues.
I can't wait
We haven't seen any deals fall out, but borrowers are pissed about the rate increases and trying to cram down spreads. However, since corporates haven't really moved, most lenders are holding firm.
I just got updated rates from a large west coast lender...they're 45bps from lows about 2mo ago.
Freddie Mac is up 30bps after two 15bp rate increases. Not the end of the world in a higher cap rate market. But in 4 cap market, an increase of 50bps has huge effects on value.
That is about what I'm seeing - spreads holding around 170bps which is putting coupons just above 4%, or 40-60bps higher than where we were pre election.
I'd love to see a few blew up and sweep in. Need a buyer under $100M, PM me haha
Last week I had a meeting with a prospect that said they're not selling any of their properties in 2017. They foresee the rate increase pulling back pricing and therefore they don't believe they'll get what they want for them so they'd rather just sit on them and collect the cash. Another interesting anecdote... the equity market for LIHTC properties is frozen right now. With Trump's announcement that the corporate income tax rate will be scaled back to 15%, this has dried up the demand for tax credits. Still need to see how this plays out over the next six months but times are a changin'.
This is a concern among all development tax credits - including new markets and historics. Last time I checked NMTCs were selling 85 cents on the dollar, I suspect this to reduce significantly with the decrease in corporate tax rates.
if you aren't re-trading 10%+, you're missing out
what is re-trading?
hey man ill buy this for 25 million.... two months later after they accepted your offer... hey man the property is a little dirty, ill give you 22 million.
LoL...
Got four LOI's signed yesterday on a small portfolio refi. Borrower felt the pressure of upward rates.
We had one deal completely drop out a couple of weeks ago, our guess is that the GP's equity got uncomfortable with the purchase price after realizing their financing proceeds were about to come way down. Taking that one off the market until late 1Q17 once things have hopefully calmed down a bit.
yeah, have seem some full leverage loans drop in proceeds due to DSCR constraints. Borrowers have not been pleased..
Maybe not precisely an answer to your question, but we've seen incredible volatility on interest rate cap pricing over the past two weeks. This hasn't necessarily caused any deals to fall out, but it's having an impact on our underwriting on deals moving forward, especially on smaller deals.
We currently have a deal under contract nearing close with a ~$25mm loan. The price for a 2-year cap was $40k last Wednesday, $44k last Thursday, $55k last Friday, $80k Monday, and $100k this Tuesday.
Have you checked after Tuesday? Doubled for us from Tuesday to Wednesday. It's been an incredibly overlooked line item under financing costs since LIBOR has been a joke, but it's nothing to be trifled with now. A lot of people don't even drop it in and underwrite 2% of "financing costs" in their entire budget. Lol.
EDIT: Dude what's your strike? That's way steep if it's anything above 2%.
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