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Q1 Market Update

Timothy Goslin

February 2, 2021

As COVID-19 has brought on unprecedented market disruptions, we believe it is vital to keep our clients informed concerning the major lending sources in the market. Read the following description to find out how each major lending segment is performing in the market:

As COVID-19 has brought on unprecedented market disruptions, we believe it is vital to keep our clients informed concerning the major lending sources in the market. Read the following description to find out how each major lending segment is performing in the market:

Life Insurance Companies:

Life Companies have remained active in 2021 with most of them increasing allocation compared to last year. Despite the difficulties faced in 2020, the majority of our correspondent Life Co’s were close to their 2020 production goals. As they move into 2021, their outlook and appetite are primarily driven by asset type, performance throughout the pandemic, and tenant credit/strength. The industrial and multifamily sectors remain the primary target for Life Co’s as these asset types are viewed as necessity products with or without the pandemic. On industrial assets, lenders will assess the supply chain of the tenant to determine any pandemic related interruptions. On multifamily assets, occupancy history and collections are paramount to understand the actual in-place cash flow vs. lease rates. Self-storage assets are also on the hot list for Life Co’s as the demand for storage units continues to rise.

Life Co pricing remains aggressive given the 10-year US Treasury holding at historic lows. Coupons are currently in the 2.75%-3.50%, with the ability to go as low as 2.50% for low levered, high quality, cash flow secured by longer-term leases and seasoned borrowers. Recent quotes we have been seeing are in the 3.0%-3.25% range. Life Co’s are still able to provide anything from a 3-year to 30-year term with typical 30-year amortizations. More Life Co’s than not have been able to provide more flexibility for borrowers by offering to prepay flex on the back half of the loan term. Overall, Life Co’s are poised for a strong production year in 2021 with plenty of capital, aggressive pricing, and certainty of execution.

Debt Funds:

Most Debt Funds are patting themselves on the back after having very successful and productive production numbers in 2020. Debt funds who originate loans on their own balance sheet were able to stay in the market throughout the entire year and take advantage of their opportunities. Those opportunities can be described as both quasi-perm loans and traditional bridge loans. As the ripple effects of COVID-19 continue into 2021 and traditional perm lenders remain selective on leverage, Debt Funds are continuing to provide quality financing options at +60% LTV, Non-Recourse, Interest-Only starting around 5%.

There are several Debt Funds with very attractive 3-year term financing options, both fixed and floating. This gives borrowers a great option to either acquire or refinance deals as low as +4%, depending on the asset, leverage, source of funds, and complexity of the deal. Floating rate deals continue to see pricing starting at L+350. Cash Flow remains a material point of interest for Debt Funds, especially in pursuit of the best pricing.

Debt Funds are beginning to finance higher leveraged deals on a selective basis, like pre-Covid levels +65% LTC and above. We have seen some reserves and other structure points come into play on non-cash flowing assets, but Debt Funds are financing them on a selective basis.


Banks have been underwriting asset types they are willing to lend on more aggressively than any other type of lender out in the market. They have gotten most competitive with multifamily assets, particularly in areas they are familiar with or with borrowers that more than meet their net worth requirement. Jonny Soleimani of our LA office recalls that most quotes he has seen come in recently are between 3.00-3.25% and 1.20-1.30 DSCR. With leverage rarely an issue for banks, loan proceeds are usually constrained by a combination of the bank’s underwriting rate and debt service coverage ratios. Banks also seem to be active in lending in the industrial space, since industrial and multifamily real estate are both considered the most COVID-19 proof.

Credit Unions:

While bank lending seems rather uniform and while each bank’s lending standards as of today really differ only marginally (how aggressive they will get with underwriting, leverage, etc.), credit unions seem more fragmented in their lending parameters for better or worse. Some credit unions mirror bank lending standards, being most comfortable with multifamily and industrial and providing more “cookie-cutter” guidance as to what asset types they will lend on and at what rates and leverage. Other credit unions have expanded their boxes to allow for property types with risk profiles considered vaster than multifamily and industrial, like single-tenant retail, although with certain qualifications. Credit Unions have been quoting between 3.25%-3.75% and take a heavier look at the borrower profile in some cases. The value propositions that borrowers find most appealing are their prepayment flexibility and their willingness to lend “outside the box” of just multifamily and industrial.


Fannie and Freddie are both open for business and will be most competitive for high leverage, workforce housing with a percentage of affordable units in the rent structure. Generally, the agencies are looking to finance multifamily deals that the life insurance companies are not touching.

Loans over $6 million are currently being priced at ranges from 2.90%-3.60%, depending on loan size, DSCR, leverage, location, etc. Deals are being priced specifically and sub-3%, full-term IO is still possible with agencies, yet not as common. Terms that have been more prevalent are 7,10,12, and 15-year terms, with pricing losing attractiveness beyond 15-years. Freddie’s 7-year ARM is still getting a lot of traction. Typically, sub-300 bps over 30-day SOFR, 1-year lockout, 1% thereafter on prepay, with a lender fee of 1/2% to 1% going in depending on the loan size. These deals are underwritten on in-place cash flow, so not a value-add bridge, but perfect for prepay flexibility. Freddie waives the 1% exit fee if the borrower converts to a fixed rate during the term. Depending on Q1 volume, pricing could improve during the year if the agencies realize they have plenty of powder left to reach their $70 billion/each annual goal.


Volume was down across the board in CMBS for 2020 but lenders were mostly open for business except for April. CMBS continues to operate albeit with some changes to the pools they are securitizing. A typical pre-COVID-19 securitization had roughly 30-35% retail loans but has been lowered to a maximum of 10-15% to address the challenges faced by borrowers in that asset class. CMBS for the time being seems focused on industrial, office, and multifamily loans with lots of single-tenant industrial deals and apartment loans to sponsors that are not financeable by the agencies. As per usual, CMBS deals are being won through a combination of rate, leverage, and the availability of interest only.

Feel free to reach out to us with any questions or with any opportunities that you would like to discuss with us!

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