Been haggling on an Opp Zone ground up construction project with the LP (OZ Fund). Given the 10 year projected hold period, we are underwriting the construction loan for 36 months (to build and stabilize) and then refinance with a 7 year fixed rate Fannie/Freddie product. Given interest rate volatility, the LP is naturally nervous and trying to peg where the take out loan in 3 years will be. The only quantifiable way I can think of using would be a standard forward yield curve, peg the projected 7 year treasury in 3 years, and add the typical spread on top. Granted, the yield curve fluctuates on an almost daily basis, but otherwise I have no idea how to go about this without alot of opinionated guesswork.
That being said, I am trying to justify the anticipated spread over the 7 Year T that we should model on top of the yield curve. Spreads typically compress a bit as the treasuries rise, so I am polling the group here to see how you would approach this and what type of all in rate you'd assume. 3 year forecast as of today on the 7 year is around 265-270 bps, FYI.
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