Leading up to the Connect Texas Multifamily event, we are conducting pre-event interviews with our panelists who will be speaking at Virgin Hotels Dallas on August 20th. Our first interview is with John Darrow, Principal at Slatt Capital.
In light of recent events, traditional lenders and banks have been scaling back on lending for certain types of properties. Is this also true for multifamily properties? And when they do lend for multifamily projects, are they more likely to provide acquisition loans or refinancing rather than construction loans?
Overall, if there is a decrease in lending from traditional sources it applies across all property types due to factors such as loan-to-debt ratios and market concentration. While some lenders may be pulling back on lending for multifamily projects along with other property types like hotels and offices, there are still many groups actively providing financing specifically for multifamily and industrial developments. Although there may be slight differences between acquisition loans versus refinancing in terms of nuances specific to each type of loan request, ultimately the decision depends on whether or not the deal makes sense.
What would your ideal loan request look like from our company’s perspective? Are borrowers required to provide additional support given the current economic climate compared to a lower-interest-rate environment?
I recently discussed this topic with a colleague and we agreed that after SVB collapsed it became more difficult for borrowers as it shifted from being a borrower’s market into one that favors lenders instead. However exceptions can still occur if you have low leverage deals built within the last decade showing strong occupancy rates; even then life insurance companies know that banks aren’t currently active in this space so pricing may not necessarily reflect what was previously available during peak times such as 1Q each year – although MF differs slightly since agencies remain involved here.
Looking ahead towards early 2025 do you anticipate any changes regarding debt availability or equity tightening/improving compared now?
Debt availability isn’t a major issue so I expect it to remain consistent. Equity investors are eager to invest but if the deal doesn’t meet certain return metrics (such as 7% ROC untrended over 3 years) then there may not be significant changes. Currently, the only market experiencing a lack of debt liquidity is office properties with some impact on hospitality as well. On the other hand, multifamily has limited equity availability due to insufficient repricing in this sector – although there is still plenty of capital ready for investment once prices adjust accordingly.
