The following excerpt is given by N. Edward Tamer, Senior Vice President of Grandbridge Real Estate Capital.
Long term non-recourse fixed interest rates are priced on a spread over the corresponding 10, 15, 20 or 25 year treasury rate. As the treasury rates have moved down, spreads have increased significantly. 10-20 year fixed rates are now in the 4% range, for standard 65-75% LTV’s. Low LTV ‘s in the 50-55% range can still obtain high 3%range for ten year term. Due to demand to refinance at current rates despite prepayment penalties, many life and pension funds are approaching 2015 allocations for fixed income debt. Both Freddie and Fannie have already reached their cap, and have gone back to congress for additional capital, and therefore have increased spreads to almost a non competitive option. The capital markets will open the fourth quarter 2015 to larger allocations for 2016 fundings due to increased demand, and the volume of commercial maturities in 2016.
