GlobeSt.com: You focus on multifamily debt. How is that doing?

Vittetoe: The agencies are still very aggressive and propping up the market. But the biggest news is that within the last 30 days we've seen life companies come back into the market.

GlobeSt.com: That is huge. Is the pricing reasonable?

Vittetoe: Well that is what I mean by coming back into the market. They can say they are coming back into the market or have never left, but if pricing is at 8 then they are not back in the market.

GlobeSt.com: So where is pricing?

Vittetoe: Agency debt is at 5.05% to 6% for ten-year fixed rate. For life companies it is between 6% to 7% fixed rate but that is only for deals at 65% LTVs.

GlobeSt.com: Are there borrowers out there that will borrow at higher rates or lower LTVs?

Vittetoe: Sure. Borrowers sometimes don't like a lot of documentation so they will go for a life loan in that case. Life companies don't tend to do a deep dive into all of a borrower's properties and assets, which is another plus.

GlobeSt.com: Are these a few life companies or are they all back?

Vittetoe: In the last 30 days I would say about 80% of the life companies have jumped back in. Now, this isn't just for multifamily. We just met with one lender that has allocated $30 million for LA County for the rest of the year. That is $30 million for all real estate assets including office, retail and so on.

GlobeSt.com: Why are they coming back now?

Vittetoe: Well, these deals are no longer competing with AAA corporate bonds, where life companies were getting better pricing this year.

GlobeSt.com: Let me change the topic a little bit: Is the money we've been hearing about for two years, the money sitting on the sidelines, finally getting deployed?

Vittetoe: A lot of people think we are still in a liquidity crisis but that was never true. There has always been plenty of money available just not at the pricing and leverage that some borrowers want. Consider, for example, a $50 million property levered at 75% LTV that is coming due for refinancing. Debt was $35.7 million but now the property has decreased in value by 25%. For the borrower to get a loan at 75% LTV he will have to come in with 30% down. In this scenario we are seeing private equity coming in and working with these borrowers. The equity is there and ready to be distributed but the borrowers still aren't willing to reciprocate on their end.

GlobeSt.com: So there is still actually a bid ask spread for lending? Even after the last 12 months?

Vittetoe: In some cases, yes. These developers love their properties and in many cases just want to work with their lender to extend to another, better day. I think they are fooling themselves and we try to educate our borrowers but in some cases a developer won't listen when you tell him or her that the property is not valued as highly as it used to be. They have a lot of pride.

GlobeSt.com: How do you see the rest of the year playing out?

Vittetoe: The debt markets are open now, credit spreads are tightening and we think there will be more lending over the next 12 to 18 months. It won't be at levels that borrowers want, but it is there and it is available.

Instant Insights /

Holliday Fenoglio Fowler's Chris Vittetoe

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