I’m a smallish multifamily developer with a few projects under construction and a few more slated to start this year. All garden and all on the east coast. We’ve been able to secure financing for our smallest deal (~$30m) at low 60% LTC with a half decent spread over SOFR. Curious to hear from others in the space what deals (if any) they are seeing get done today. Cheers.
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If your deal is small enough for a community bank you can still get decent leverage and terms, they will compete for your business if everything checks out.
if it’s bigger than that, it’s going to be a big challenge. The biggest and most sophisticated developers in the game are getting 60% LTC max, even with strong recourse. And pricing is up 100 bps over a year ago.
Stabilized DY is what lenders are looking at now..
Recently got 305 at 65 LTC for 120mm, and 400 bps for 75% at 120mm as well. Great sponsorship tho.
yo you got any more of dem loans tho. I'm a top sponsor too. Tides level preftige.
Jokes aside though these are obviously recourse loans right?
What’s current max range for community banks?
325-450 over term SOFR, 50-65% ltc.
I heard that decent sized bank (Fifth Third / Key Bank type) closed on a MF project at about 275 over SOFR at 65% LTC. Don't think it was a big project though, maybe like 150 units in a tertiary East Cost market.
I've seen a few banks quote stuff this low in exchange for deposit business and personal guaranties. regional banks are very hungry for deposits at the moment.
Have a $300mm asset bank doing 60% S+225 in exchange for $5mm deposits and repayment recourse until completion. Good guarantor. FL market with a good sponsor.
We got a 15M loan from a credit union for our development. Last minute, oh hey by the way we need $1M deposited into an account with us. Luckily my partner helped us out. My broke ass was sweating.
Shopping around our 232-unit ground-up deal in the SE and can't seem to get above 60% LTC. We're assessing whether there is appetite to split the note between a few lenders.
We are getting a few quotes at 275 to 325 over SOFR. Community banks, regional (mid-size) banks, credit unions, and life co’s are in that mix. Recourse and prepayment changes dramatically between groups. Leverage and rate is pretty similar.
Also curious - what are y’all seeing on untrended YOC for the deals getting done or at-least receiving term sheets?
Thanks for sharing - what origination fees do they typically charge, and do you approach lenders directly or work with a loan broker?
65% LTC + 450 in secondary Florida market. Strong balance sheet operator with great track record.
Bump
As a lender here I say overall whole loan is at S+450, but it depends on markets and product type. Can go to as low as S+350 if shorter j-curve.
leverage?
For some reason your reply didn't pop up. 50-65% is common.
Thanks for the insight.
Can you share what origination fees are typical for standard bank/lifeco loans? Also how much worse are terms for non-recourse usually?
1% for origination and half a point for exit. Sometime exit is waived if project is not too risky.
These must all be full recourse loans with relationship lenders where you are holding deposits or something….
Standard recourse with 50% burn down after CO with one or two additional burn downs based on DSCR. No deposits and working with lenders with whom we do not have a relationship.
What kind of L and net worth as % of loan?
I ask because I’m surprised that capital is still out there. I typically guide away from fdic lenders to balance sheet non-recourse at 75% S+575-650. FDIC lenders all seem on the sidelines…
Mid sized regionals and syndications with several small regionals. 50%+ nw to loan amt. How active are the non-fdic lenders today? Have spent zero time exploring that path yet.
At a life co lender. We are closing a $60m 60% LTC at +320 with a well know sponsor.
DM me if you want to try and put out another TS at/near that pricing. We have a couple projects through year end in the $90-150mm range that would fit this bill
DM me. I have a very similar deal in terms of pricing/leverage with a well-known national developer. Their banking relationships are on pause and are looking for alternate options.
Has anyone seen any non-recourse construction loans close in the last 6-8 weeks?
Market seems to be 100% closed. I agree with early posters comments, if you have a <$40m deal there is some small community banks willing to move forward but it seems like once you break the $50m market on project costs... the debt bid list is short appears to be short overall. Now there will always be exceptions for banks willing to do deals for their relationship lending clients or deals with extremely strong sponsorship/guarantees/deposits.
Also curious if anybody is receiving construction pref/mezz quotes in the current market on institutional MF development deals? What rate, equity kicker req, etc?
Our shop is only doing Construction Perm's with lifeco's and HUD deals at the moment
Down the fairway for large non-recourse deals is 75% LTC at S+600. Anything better / worse than that is a credit improvement / issue. These are balance sheet lender debt funds.
In Canada the only viable financing for purpose-built rental construction today is through CMHC's MLI Select program, which offers high leverage, generally 80%+ and up to 95% LTC, and favorable interest rates (Prime +/- 25 on the construction piece and rolls into a perm loan at the rough equivalent of the 5 or 10 year GOC + 100 with 40-50 year amo). In order to qualify for this program, you need to have either a considerable affordable housing component or meet energy efficiency criteria. There is also an accessibility criteria but its unrealistic because it requires something silly like 100% of units to meet extreme accessibility standards.
Even with this, there are almost no markets in which rental development works right now in the country unless you're a pension fund with a 15% target IRR and minimal development spread requirement on ground-up development.
Another problem for large loans is the syndications market is non existent. So even if you find a lender at 55-60% LTC for a large construction loan, it’s close to impossible to find another bank to take part of the deal.
Bump
I’ve been quoted for 200MM+ loans anywhere from 45-50% by OZK, 45% by banks recourse (S+325), debt fund non recourse 60-65% S+475-550
Almost all banks are talking about 10-25% deposit relationship
This sounds about right.
I know a few shops doing 45-50% LTC loans on 200-300MM deals… ground up multi anchored mixed use… do you have any idea what the strategy is? Do they just have LPs that are OK with less than a 2x return? Am I looking at it wrong? Maybe at the bridge to agency part lever it up and cash out refi to raise leverage?
We are still getting as high as 60% LTC for large multi family projects but only for the very best developers and with strong recourse. Pricing 300-350 with anywhere from 75-125 bps of upfront fees.
Recently closed a $50m loan at S+750, 73% LTC for a family that was developing their first MF project if u want to know where the high watermark is lol.
This thread has me convinced that we will indeed be going into a recession, just a matter of time. Stock Market is not the economy... we rallied to ATH's post Bear Stearns (not saying this is 2008, but just showing the stock market gets ahead of itself)
Just got a deal done for a large national sponsor at 55% LTC, 325 pricing, 1% fee, recourse to a very strong entity. We size to a 10% untrended debt yield.
How is the equity making any money at 55% with S+3xx+ paper? Did you put a second position up to 75% or did the senior accept something like PACE?
I’m questioning how these developers are making any money or how the deals pencil with these numbers. Rents aren’t high enough nor growing fast enough to support the refi/ be able take out all proceeds, will require equity contributions just to get a perm loan. Idk how these sponsors will survive these projects if guaranteed… rents are going negative or flat for at least a couple years in all of these markets, no proforma in this thread is predicting that
Perm rates are still mid 5’s, just requires a bigger interest reserve. There’s also a credible story that with financing being so tight 2025/2026 deliveries in cities with population growth will see significant rent growth.
Second this but will also add hard costs are already starting to come down. We don’t expect a massive drop in pricing but do see more subs bidding on projects than before. Haven’t seen any real competition for projects like this for the last couple of years.
Con costs down, or just not growing at the same pace? Bids aren’t cheaper today because if materials, it’s the GC realizing what it would take to do the deal today = less profits. That’s not good in the long run, especially if rates stay this level
Well if my costs for electrical were $X 6 months ago they are down about 10% from that. Even bigger savings in plumbing. I am close with several of the major subs in my territory. They are pretty open about how good they’ve had it over the last 36 months. I generally hear margins for them were almost double the long term normal.
Deleted - weird formatting that couldn’t be fixed
Yeah, they single handily lost deals for us by "hedging" future costs into the pricing and then also threw contingencies on top, with escalation on the entire sum (our principles owned 50% of the GC as well, so reporting was an unbelievably hot topic)… multiple times had to sit the GC down and have them walk me thru every single line up and justify their price changes since they were basing on design drawings and massings. We underwrote so many deals and the GCs simply aren't sophisticated enough to play the game well, and they just throw numbers at you that cover their ass. My point is, it's not materials that are loosening up pricing today. Your electric comment may be 10% lower than 6 months ago, but where was that price 6 months ago against years prior? Literally double…? What about lead time for materials like switch boards and other stuck-in-shipping/manufacturing overseas-bottleneck items? Where lumber at against historical? How do you price an object you need that'll take 2 years to even get here? GCs either take less profit or simply don't bid today, that's a bad place to be for everyone…
Bump. Feel like this is evolving daily so curious to hear what’s going on. I just locked in a construction deal at 7% for 5 years with no prepayment penalties at 65% LTC (tertiary east coast market). Anyone else getting traction?
We are still quoting S+300-350 sized to a 10% DY with strong recourse required.
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