Student Housing Business

NOV-DEC 2015

Student Housing Business is the voice of the student housing industry.

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CAPITAL MARKETS NOVEMBER/DECEMBER 2015 STUDENT HOUSING BUSINESS .COM 38 If you have a transaction where there's demand and there's an experienced sponsor who runs the property, maybe we expand that to 1.25 DCR and 80 LTV. It really depends." "Each market, each property and each spon- sor paints a different picture and we have to make a decision based upon that," Stepchuk adds. While the agencies reign on higher LTV deals, on lower LTV deals below 60 percent, the life companies are 20 to 50 basis points better on rate, Weaver notes. And, according to Roelke, CMBS has been quoting all-in rates that are approximately 15 to 20 basis points wide of Fannie and Freddie. "Life companies will always win on rate, but the leverage is low when life companies are quoting student housing at 50 to 60 percent LTV," Bradley says. "The agency rates are lower than CMBS, but the margin is the closest it has been since the re-launch of the CMBS business, CMBS 2.0. However, the markets have slowed down with securitizations due to volatility in the secondary markets at this time." With the spreads and rates as they are, bor- rowers should be prepared to respond with more equity. "Spreads and overall rates have widened out and we've seen lower cap rate deals that are DCR-constrained," Weaver says. "So, if you're going after that 5 percent cap rate deal be ready to put 30 percent equity in the deal." The Cap When talking to anyone in the business about student housing fnancing earlier this year, "the cap" was top of mind. How would Fannie and Freddie, the two leading lenders in the student space, operate with a $30 billion multifamily lending limit for the year? And, what would the overall impact be on the student housing capital markets? Thanks in part to additional FHFA exemp- tions, the cap wasn't as much of a detriment as many feared, at least according to the agencies' numbers. "This year is actually on track to be the largest year Freddie has ever had in fnancing student housing," Martinez says. Stepchuk agrees. "Fannie Mae is still lending, and deals are getting closed," he says. "In the frst half of the year alone, we did approximate- ly $600 million in student loan deliveries from our DUS lenders. All of last year, we did $830 million. There's still competition for deals, and I'm not expecting to get every deal. But we're still quoting and winning business." This isn't to say that the agencies haven't experienced any impact from the cap, as they have had to be more selective in the deals they chase. "Student housing now has to compete with every other deal that counts against the cap, so we have to weigh the risk and proftability of each deal," Martinez says. "But even though the cap has played a role, we've been able to work with it and are up to the challenge." RICHARD MARTINEZ Vice President, Multifamily Production & Sales for Freddie Mac

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