ORANGE COUNTY, CA-While some apartment markets are seeing a slowdown in construction, others are ramping up, and financing seems to be more readily available than in the near past. “Apartment development is rapidly accelerating in many markets, and several major lenders appear willing to underwrite construction on select projects,” said William Hughes, SVP of Marcus & Millichap's Capital Corp., in a recent Orange County apartment market report.

Hughes says that the primary considerations for lenders include the quality of sponsorships, metro-level property trends and the strength of intrinsic demand drivers for new properties. Also, continued improvement of property operations and enhanced commercial real estate loan performance are expected to drive lending for 2013. “Banks are streamlining underwriting standards and increasing commercial mortgage originations. Lenders have relaxed underwriting standards over the past 12 months.”

According to the report, loans originate at LTVs between 70% and 80% and debt service coverage varies between 1.15x and 1.25x. Interest rates for loans over $3 million for a 10-year period are between 2.75% and 4.25%. For the same time period, loans under $3 million run from the low- to mid-4% range.

“The Federal Reserve continues to sustain actions to foster economic growth,” says Hughes. “During the first quarter, the central bank reiterated its intention to purchase bonds to hold long-term interest rates near 0% until the unemployment rate drops to 6.5%. The unemployment ticked down to 7.6% at the end of the first quarter.”