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Changes in Mortgage Financing

May 8, 2016 by Randybaconin Commercial Mortgage Lending, Real EstateLeave a Comment

There’s no doubt that now is an interesting time in the mortgage market for multifamily assets located in secondary locations, brimming with potential, promise and uncertainty. With cap rates compressed in the majority of primary markets located in coastal cities across the U.S., many of the industry’s largest players are turning to secondary markets for opportunities to purchase properties with higher growth, and therefore yield potential. This is driving aggressive capital activity in these markets and resulting in upward pressure on multifamily rental rates.

These trends are resulting in significant growth potential across properties located in secondary markets that have been tempered by other large-scale market factors in the GSE and commercial spaces as the industry determines its “new normal” and adapts to the changes being brought about by the global economy and investment activity.

The secondary mortgage market today—promise through the shifts

While the demand for mortgages against properties in secondary locations has experienced strong growth over the past four years, key aspects of its character are experiencing historic shifts. One of the best examples of this is within the central region of the country, in cities like Oklahoma City, Okla., and secondary markets throughout Texas, where the availability of capital has been very strong because of the growth of the oil and gas industries. As those employment markets have grown weaker as a result of falling oil and gas prices worldwide, the mortgage market outlook in those areas is also waning, requiring a more conservative investment approach and allowing other previously less attractive secondary markets to take center stage.

View entire article in National Real Estate Investor

To find out more about our multifamily financing visit Liberty Realty Capital here.

Congress’ Budget Package Delivers Perks for Multifamily Investors

January 5, 2016 by Randybaconin Real EstateLeave a Comment

Congress gave a nice Christmas present to the apartment building industry in the omnibus budget package, passed just before the holidays.

The budget package includes a long list of good things for apartment investors. International investors finally got some relief from the punishing Foreign Investment in Real Property Act (FIRPTA). Affordable housing investors will benefit from the extension of provisions to the federal low-income housing tax credit (LIHTC). Congress also renewed bonus depreciation, small business expensing and the New Markets Tax Credit Program, in addition to tax benefits that reward energy-efficient buildings.

The bill passed through both houses of Congress December 18, and President Obama signed it the same day.

Foreign investors get relief

Many foreign investors in U.S. real estate will no longer have to pay the heavy penalties imposed by FIRPTA, which amounted to a 30 or 45 percent tax on many types of profits made by foreign investors in U.S. properties. In 2007, an IRS ruling allowed FIRPTA to tax profits of investments in REIT stocks. Typically, foreign investors don’t pay any taxes on their investments in the United States. They can buy stock in U.S. companies like Apple or Facebook, for example, without worrying Uncle Sam will tax their profits.

The changes to FIRPTA are “the most significant” since the law’s enactment in 1980, according to a statement from the Real Estate Roundtable, based in Washington, D.C. Foreign pension funds that invest in U.S. real estate no longer have to pay the tax. Also, foreign investors can now own a stake of up to 10 percent in a U.S. REIT without triggering FIRPTA. Before the change, the trigger was set at 5 percent. That will make a significant difference for private REITs, which are often small enough so that a foreign investor could own a significant share of the company.

Boosts for sustainable development, community development, affordable housing

Advocates for energy-efficient, green development welcome the extended tax deduction for energy-efficient commercial buildings. The budget package extends the deduction through 2016 and toughens the requirements buildings need to meet to get the deductions. The existing law ran through 2014 and gave a $1.80-per-sq.-ft. tax deduction to properties that beat by 50 percent the efficiency standards set out in the 2001 American Society of Heating, Refrigerating and Air-Conditioning Engineers Standard 90.1. In the extension, buildings will have to meet ASHRAE’s 2007 standard to get the deduction.

View the entire article here in National Real Estate Investor.

To discuss multifamily mortgage financing needs contact Liberty.

Multifamily Lending Starting to Level Off

November 10, 2015 by Randybaconin Commercial Mortgage LendingLeave a Comment

Lenders will keep pouring money into apartment properties over the next two years, originating about the same volume of loans in 2016 and 2017—with slight increases—that they are likely to close in 2015, according to the latest Commercial/Multifamily Real Estate Finance Forecast from the Mortgage Bankers Association (MBA), an industry trade group.

“The forecast anticipates continued strength and growth,” says Jamie Woodwell, vice president for the research and economics group at MBA.

That’s still going to be a big change from the last few years, when business of lending on multifamily real estate didn’t just grow a little, but instead grew incredibly quickly. So far in 2015, lenders have increased the volume of apartment loans they made by well over 10 percent compared to the year before. In 2016, experts expect more moderate growth, with less frenetic competition to make deals.

Outsized growth

Lenders will likely originate a total of $224 billion in permanent loans to multifamily properties in 2015, according to MBA. That’s a 15 percent increase from the $195 billion they lent in 2014, which in turn marked a 13 percent increase from $173 billion in multifamily originations in 2013. That year marked an 18 percent increase in originations from 2012.

Lending volume can’t grow like that forever. The growth this year already caught most experts by surprise.

Read entire post in National Real Estate Investor here.

Find out more about Liberty at our Youtube page.

To discuss multifamily mortgage financing needs contact Liberty Realty Capital Group.

Class-B, Suburban Class-A Apartment Properties Gain Momentum

October 29, 2015 by Randybaconin Commercial Mortgage Lending, Real EstateLeave a Comment

Class-A apartments in core neighborhoods may no longer be the best investment in today’s market. Vacancy rates are rising for the most expensive apartment communities in urban neighborhoods, research shows.

“The urban class-A market is seeing some pressure. It’s not a crisis by any means, but it’s now an underperforming segment of the market,” says Jay Parsons, an expert with MPF Research, a division of RealPage, Inc., an apartment market intelligence firm. “We expect that to remain the case through 2016 and likely into 2017.”

The pressure is due to the fact that developers are building so many new luxury apartments in urban areas, especially in downtown districts. Vacancy rates are lower and rent growth is steady for apartment communities that don’t have to compete so hard to attract renters—including class-A apartment communities in suburban areas, where there isn’t so much new construction, and class-B apartment communities everywhere.

“Class-A vacancy rates will continue to rise, while class-B vacancy should decline as few developers build class-B buildings,” says Barbara Byrne Denham, economist with New York City-based research firm Reis Inc. “Rents should continue to rise, although the rate of growth for class-A rents will be lower than it has been. The rate of growth for class-B rents should stay the same.”

Vacancy rates fall for class-B apartments

Usually, class-A communities have significantly fewer vacant apartments than class-B communities. Over the last dozen years, from 2003 to present, the class-A apartment vacancy rate averaged 5.2 percent. That’s 40 basis points lower than the vacancy rate for class-B apartments. But that difference has vanished as class-B apartments catch up to class-A—both had an average vacancy rate of 4.9 percent over the last two years, according to data firm Axiometrics Inc.

Read entire article in National Real Estate Investor here.

Find out more about Liberty at our Youtube page.

To discuss apartment mortgage financing needs contact Liberty here.

Baby Boomers, Less Homeownership Supports Apartment Markets

September 1, 2015September 12, 2015 by Randybaconin Commercial Mortgage Lending, Real EstateLeave a Comment

The apartment business is depending on strong demographics and stronger demand to keep absorbing the hundreds of thousands of apartments still planned to open this year.

“In 2014, apartment rents grew 4.6 percent despite a fairly good amount of supply,” says K.C. Sanjay, senior economist for data firm Axiometrics. “The reason for this is the job growth, right above 200,000 new jobs a month, and rental household formation.”

That’s sounds like a solid foundation for strong demand for apartments. But a close look at the demographics shows a few odds twists and turns in the data. The growing number of U.S. households turns out to be largely due to an aging population, not young Millennials with new jobs, according to a recent report by the Terner Center for Housing Innovation at the University of California at Berkeley. Also, an unusually low rate of homeownership is driving people to rental housing—but that can’t last forever, reports Axiometrics.

Read entire article here in National Real Estate Investor

To learn more about multi family financing contact Liberty Realty Capital Group

Apartment Volume Slides 17% in July

August 28, 2015October 6, 2015 by Randybaconin Real EstateLeave a Comment

The frantic apartment transaction market of the past few years may finally be slowing.

With $9 billion in transaction activity in July, apartment sales fell 17%, according to New York–based commercial research firm Real Capital Analytics (RCA).

RCA attributed the decline in apartment sales activity to a drop-off in portfolio and entity-level transactions, which fell 65% to $1.2 billion. But RCA noted other problems as well in its report.

Read entire article here in MultiFamily Executive.

To find out more about multifamily financing contact us here.