Excellent Multifamily Construction Loans Offer Preferential Terms

April 11, 2017

We would like you know that while banks are pulling on the reins of multifamily construction loans, the non-recourse construction lending market is flush with capital, as there are many balance sheet lenders who are eager to provide non-recourse construction financing for ground up and renovation projects on good terms for borrowers.

We have closed more than $6 billion in development transaction just in the last two years and currently have more than $2 billion of construction financings in application and/or commitment.

There is no question that we can provide you with absolutely the best terms which can save you millions of dollars in interest expense and provide you with much higher leverage which will super charge your returns.

Below are just a few of the transactions which we are presently in application on:

$280 Million Ground-Up Brooklyn Construction Loan – Carlton sourced two balance sheet lenders to provide the foregoing non-recourse ground-up condominium construction loan.

$650 Million Manhattan Mixed Use Ground-Up Condominium Construction Loan – Carlton sourced an overseas lender to provide a non-recourse ground-up construction loan on a high profile Manhattan condo mixed use project.

$225 Million Multi-Family and Condo Ground Up Construction Loan – Carlton sourced a balance sheet lender to provide this non-recourse loan at a cost less than LIBOR 700.

$60 Million Ground-Up Multifamily New Jersey Loan – Carlton sourced a New York commercial bank and balance sheet capital provider for this 250-unit ground-up multifamily property in a prime New Jersey location. The commercial bank financing is LIBOR 250.

Ground-Up Hotel Construction Loan – Carlton arranged acquisition financing and structured a partnership to develop a 190-key hotel and luxury branded condominium to West Hollywood, CA

We provide capital for projects nationwide and invite you to contact us to discuss on a complimentary basis how we can provide great capital for your renovation and/or transitional programs. You can reach us at webleads@carltongroup.com.

In addition, Carlton has also structured and closed billions of dollars of equity joint ventures so we can top off your non-recourse financing with a great equity joint venture. Please click here to view these transactions – $6 Billion Recently Completed Construction Loans

I look forward to hearing from you. In the meantime, we have provided you with the below article explaining the dynamics in the current lending market.


Multifamily Construction Loans Are Harder to Find

Apr 10, 2017 Bendix Anderson

Bank lenders—the traditional source of construction capital—are offering smaller loans compared to the cost of development, when they offer to lend at all.

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Developers are struggling to find construction loans to build new apartment properties, but strong projects can still get financing.

“We are still finding attractive options for good projects where the economics pencil,” says Jeff Sause, director with capital services provider HFF. “There is money out there if you look hard enough.”

Bank lenders—the traditional source of construction capital—are offering smaller loans compared to the cost of development, when they offer to lend at all. However, other sources of capital can still fill the gap. Financing alternatives include life company lenders, private equity debt funds and the programs of the Federal Housing Administration (FHA).

“A number of insurance companies, private equity shops and specialty finance lenders have been quoting deals, and more groups are planning to start programs,” says Sause.

Banks and restrictions

Banks are still the largest player in the apartment construction market and they remain very active. But they aren’t willing to lend as much compared the value of the property. Banks that once made loans that covered up to 75 percent of development cost now only go as high as 65 percent. Interest rates are higher too, typically floating between 275 basis points to 325 basis points over LIBOR. That’s up from the low 200-basis-points range earlier in the recovery.

Banks are less willing to lend partly because of new regulations that require them to keep cash in reserve to offset risky investments like real estate construction loans. The regulations include international rules like the Basel III and U.S. laws like the Dodd Frank Financial Reform law. “The amount of construction loans being arranged in this market is down substantially,” says Mitchell Kiffe, senior managing director with CBRE Capital Markets.

Lenders of all types are also growing more cautious as more new apartments open and vacancy rates begin to climb in many markets. Many lenders already have construction loans that are not performing as well as expected. “Absorption is more challenging,” says Kiffe. “Pro-forma estimates are maybe not being achieved. Lenders are looking carefully at all their new loan applications.”

Where to look for financing

New sources can help developers find the money to build. “As banks face higher regulatory scrutiny and capital requirements due to Basel III HVCRE standards, non-bank lenders are entering the market with more ease,” says Justin Bakst, director of capital markets at research firm CoStar.

Private equity debt funds can provide construction financing for apartment properties—at a price. The cost of this capital may be twice the interest charged by a bank lender for a loan that covers 55 percent to 65 percent of the cost of construction, with floating interest rates from 600 to 700 basis points over LIBOR.

Borrowers can also combine a lower leverage bank loan with mezzanine financing, often provided by a debt fund. The financing package often covers a total of 75 percent to 80 percent of development costs. But the interest rates charged by mezzanine lenders are often as high as 12 percent to 13 percent. Many banks also refuse to make construction loans in combination with mezzanine financing. “Many banks are not comfortable with mezzanine debt,” says Kiffe.

Life companies also provide construction financing. However, they tend to lend to very high-quality apartment projects, which may already have a lot of financing choices. Borrowers that receive life company financing may also have to commit to a construction loan that is merged with a permanent loan, with a long, 10-year combined term and a fixed interest rate.

“Life companies want longer duration assets,” says Kiffe. That’s not always a good fit for merchant builders that may plan to sell their developments after they are stabilized.

Meanwhile, borrowers with time to spare may also turn to construction financing provided through the programs of the FHA. These loans typically offer low interest rates, but can take as long as six to nine months to close once a potential borrower submits an application.

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