Student Housing Business

MAY-JUN 2018

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

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CAPITAL MARKETS May/June 2018 StudentHousingBusiness.com 48 vide the majority of construction financing in the market but we are seeing a significant demand and market share going to some of the alternative construction lenders in the market today." Those alternatives include debt funds, who have been getting aggressive on interim financing and other types of financing in the market. Positive Lending Climate Generally speaking, lenders and intermediaries are seeing a posi- tive lending climate and steady activity as the year approaches its halfway point. "So far, in 2018, we are still see- ing a healthy agency appetite for student housing [from the GSEs], although with the 10-year Trea- sury rate in the 3 percent range, there may be some deals that are priced out by rate increases in the second half of the year," says Bradley. The concern caused by the spike in Treasury rates that the coun- try saw after the 2016 presidential election has slowly dissipated over time, but still remains a top issue for borrowers as they plot their financing strategies. Interest rates have risen and the cost of financ- ing is a major factor in the returns that developers and investors make on projects. Many sponsors are considering the cost of financ- ing carefully for projects planned to open in 2019 and beyond. "The rise of the Treasury and Libor rates is certainly top-of- mind — with an impact on loan proceeds due to debt service cov- erage constraints," says Benedetto. "We see both underwriting met- rics and spreads remaining rath- er flat for the foreseeable future. Positives are that lenders are still very interested in student hous- ing. Permanent lenders remain active and are aggressively trying to win business. Additionally, the bridge loan space has significantly opened up, allowing borrowers to add value to their portfolio of new acquisitions." "Supply is always a focus, and the biggest challenge at present is the cost of projects and the mar- ket rents needed to achieve the necessary returns," says Jennifer Molnar, senior vice president in the commercial real estate group at Wells Fargo. That concern hasn't slowed new development and acquisitions, however, as evidenced by the many deals SHB has covered over the past six months. "The appetite for product among investors is solid and there is plenty of liquidity in the debt markets," says KeyBank's Wil- liams. "Strong sponsorship is, as always, the main driver. We want to have a comfort level that when the next downturn occurs, own- ership will have the experience and wherewithal to weather the storm." Advocate. Adviser. Ally. As a full-service capital provider and servicer, NorthMarq remains an integral part of your loan from beginning to end. We combine more than 50 years of experience with our deep knowledge of all aspects of your transaction to see you through the things you see coming... and the things you can't. C O M M E R C I A L R E A L E S T A T E D E B T , E Q U I T Y & S E R V I C I N G To speak to your local expert, visit northmarq.com/offices Refinance options? Defeasance? Partner buyout? Loan maturity? Supplementals? Disposition? Reserve draws? Prepayment? Ownership change? Lease approval? Property damage? Billing questions? We're here to help.

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