Liquidity & Valuation: How to Combat the One-Two Punch on CRE & Multifamily
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Could commercial real estate be the next shoe to drop at regional banks?
That’s the lead-in for a story posted recently on Marketplace.org. It is just one of a raft of stories in the media recently following high-profile bank failures in March. According to the Marketplace story, “banks have $270 billion of commercial real estate loans coming due this year” and “about $80 billion of that is in the office space”. There is a new focus on regional banks’ exposure to commercial real estate (CRE) – and office in particular. Office occupancies are generally down, valuations are uncertain, and many loans are coming due. According to a recent article in American Banker, “problems in the office space are likely to spread to apartments and retail properties”.
Access to capital may be more difficult.
Regional banks are a major source of capital for commercial real estate of all types. Developers often have deep relationships with those banks. As banks pull back, wary of exposure to commercial real estate and focused on liquidity in the wake of high-profile bank failures, developers may face difficulty accessing capital both for new projects and to refinance existing CRE loans. For CRE, liquidity could be a real issue.
Valuation poses another significant challenge.
The rapid rise in interest rates is already being felt in cap rates. An article posted on Globest.com suggests that cap rates are likely to rise significantly for apartments and other CRE. Even when debt is available, there will be pressure on loan proceeds as rent growth slows and valuations are in flux.
FHA loans offer stability in any financial landscape.
In the current climate, FHA-insured financing can be a solution to the twin problems of liquidity and valuation. Whether for new construction or refinance, FHA mortgage insurance means capital will always be available, with consistent underwriting across markets and over time. Lower debt service coverage (DSC) requirements and a longer amortization and term mean more loan proceeds. And for new construction, FHA underwriting is based primarily on cost and coverage, with no LTV test.
When you need a steadfast, trustworthy partner, rely on AGM.
As a family-owned FHA lender and GNMA seller/servicer with over 30 years of experience, we know the multifamily CRE lending process inside and out. You’ll enjoy a personalized experience and continuity throughout your deal with a single, knowledgeable point of contact. From new construction and substantial rehab to acquisition or refinance — for both market-rate and affordable projects — we go to bat for our clients to bring deals to their successful completion. That’s probably why more than 60% of our borrowers are repeat clients. Count on our experienced team to guide you through the FHA financing process and help you get the deal done.
Even amid banking uncertainties, FHA financing remains strong. AGM will partner with you to get an attractive multifamily loan you can count on. Please contact our helpful team today.
About AGM Financial
Founded in 1990, AGM is a leading FHA lender and GNMA seller/servicer. From new construction and substantial rehab to acquisition or refinance — for both market-rate and affordable projects — AGM gets the deal done. Family-owned with over 30 years of experience, the firm has closed over $9 billion in FHA-insured multifamily project loans nationwide. We underwrite, fund, and service all of our loans. Developers and owners can count on AGM to be accessible, transparent, consistent, and ready to lend. From new construction to substantial rehabilitation to acquisition and refinance — for both market-rate and affordable projects — we can get the deal done. To learn more about AGM, call 800.729.4266 or visit www.agmfinancial.com.
