Millichap report, apartment and industrialproperties have been able to draw greaterinterest with banks and non-agency lendersremaining active originators, most often funding five- to seven-year loans with rates in theupper- 2 to mid-3% range. Evolving e-commerce trends, challenges in the single-familyhome market and limited capital expenditurerequirements have helped to ensure financingremains available at favorable terms for bothasset classes, Marcus & Millichap said.
For the office class, though, most lendershave been more selective when assessing properties in spite of strong rent collections, favoring suburban office deals while requiring loan-to-values closer to 50% for buildings in largerdowntown markets. Life insurance companieshave been targeting lower leverage deals in thesector as well as focusing on multifamily andsingle-tenant retail assets, according to theMarcus & Millichap report.
In some cases, lenders are willing to stretch
their comfort level to make a loan, depend-
ing on the asset class. Life sciences, clearly,
has become a popular asset class but not
many lenders understand the nuances associ-
ated with it. James Millon, vice chairman,
On the other hand, asset classes with repu-
tational risks can be difficult to underwrite
even if the hard numbers pencil in. Lending
to a senior housing facility that has had
COVID deaths could potentially provide a
reputational risk for lenders. “Frankly, it’s just
better to wait things out, let the storm blow
over and start financing these asset classes
again,” Millon says.
Even retail, which suffered a wallop from
the pandemic, is finding that deals can be
underwritten. “There is a myth that retail is
unfinanceable today and that’s absolutely
untrue,” says Christopher Drew, senior man-
aging director, capital markets at JLL
Americas. “When structured appropriately,
plenty of financing is available to investors. In
fact, certain lenders like local and regional
banks never stopped lending. Lenders seek
the same characteristics for retail that inves-
tors pursue, which is well-located assets with
essential tenancy.”
JLL capital markets retail debt placement
teams closed $542.83 million worth of retail
financings between July 1, 2020 and November
30, 2020. Of the 29 JLL retail transactions
closed during that time period, 12 were gro-
cery-anchored retail assets. The remaining
loans were a mix of non-grocery-anchored,
shadow-anchored retail, retail condominiums
and single-tenant assets. The average loan-to-
value was 62% with an average interest rate of
3.96%. Grocery-anchored deals had an aver-
age LTV of 63% and average rate of 3.79%,
with an average loan term of 10 years.
Insurance companies and local andregional banks led the way toward gettingretail deals done in 2020, according toClaudia Steeb, managing director, capitalmarkets, JLL Americas. “They have flexibility,tend not to have significant exposure in anyparticular asset class and are able to arbitragethe market so when competitors pull out, theycan jump in and gain extra yield for theirportfolio.” ◆
“THERE IS A MYTH
THAT RETAIL IS
UNFINANCEABLE
TODAY AND THAT’S
ABSOLUTELY UNTRUE.”
CHRISTOPHER DREW
SENIOR MANAGING DIRECTOR,
CAPITAL MARKETS AT JLL AMERICAS.
