Real Estate Forum

turbo-charged their allocations to multifamily. Always quiet about their investment strategies, these players are particularly so this year. However, lenders and brokers in the trenches say it has become clear that since the beginning of the year, and especially in the past 60 to 90 days, they have stepped up their presence.

“They really began to accelerate lend-
ing within the past month or so,” says
Howard Smith, executive vice president
and chief operating officer of Walker &
Dunlop. “Before that, they were just pro-
tecting their own portfolios, rolling over
the loans they wanted to keep.”
But few people expect the GSEs to slip
in their dominance of the market, at least
through the rest of the year. “On the pro-
gram side, the agencies have been aggres-
sive and far ahead of everyone else,” Webb
says. “Life companies and other lenders
will get more aggressive but right now, the
agencies still have an edge.”
For the vast majority of multifamily bor-
rowers, that means deals can get financed
at 80% LTV, Freddie Mac’s May says. The
agency also looks for a debt-ratio coverage
of 125 or better. In some transactions, he
says, the coverage and LTVs can trade off.

May declines to discuss specific pricing.
But according to John S. Brownlee, senior
managing director in the Dallas office of
Holliday Fenoglio Fowler, no one can
touch the GSEs’ pricing on 75% to 85%
financing. “Five-year agency paper is the
cheapest right now,” he says, “ranging
from 4.75% to 5.25% and up to 75% or
potentially 80% LTV.”
It’s the lower-leveraged deals where the
insurance companies are starting to play
hard, Brownlee continues. “Insurance
companies are competing strongest in the
50% to 65% LTV range. They are pricing
from 5% to 6.5% and are more likely to
complete closer to 5%.” In some cases, he
says, all-in pricing can be as low as 4.75%
to 5.5% on fixed rate requests.

May acknowledges the hunger the competition is showing. “For low-leverage, 50% LTV deals, they can squarely beat our price in the market,” he relates. “If they see a property they like and it is low leverage, they will come in pretty aggressively.” Speaking generally, agency pricing has followed market trends for the past two years, May says. When the credit crisis took hold, spreads widened and most players left the market. While Freddie remained, it had to widen its spreads in order to capture the risk in the market.

Now pricing is tightening again as other
capital sources return. According to May,
Freddie Mac is now pricing close to where
it was at the end of 2007 and the begin-
ning of 2008.

Nonetheless, spotty as it may be, the entrance of new competition is good news for developers. This is especially true if they’re seeking low-ticket loans for planned class A product—the only multifamily assets that life insurance companies and banks appear to want.

Typical are deals such as the $6.5-million loan Prudential Life Insurance provided in March for a 102-unit apartment building in Washington, DC’s Foggy Bottom neighborhood. Cassidy Turley secured a long-term, fixed-rate loan for the property, which had a very strong sponsorship in

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