How the Multifamily Industry Survived 2023

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There was a brief window in which borrowers were able to shift to five-year fixed-rate loans but mainly it has been a volatile year.

During a recent capital and lending session at the GlobeSt. Multifamily Fall Conference, experts discussed the evolving financial landscape. They reflected on the period from 2011 to 2012 when rates remained relatively stable, with 2020 seeing a significant drop due to the impact of Covid-19.

By March 2022, the focus shifted to tackling bridge loans and other financial challenges. The panelists provided updates on various aspects of capital and lending, including debt renegotiation, value-add multifamily acquisition, redevelopment opportunities, and the effects of increasing interest and cap rates.

Moderator Malcolm Davies, founder and senior managing partner of WAY Capital, inquired about how the industry has been dealing with the challenges posed by interest rates.

Panelist Laurie Morfin, senior managing director at NewPoint Real Estate Capital, explained that her firm had to get creative in helping clients with cash-in refinancing, particularly since many had initially underwritten to a 4-point exit. “We had to think about rate locks,” she noted. The market dynamics had changed rapidly, prompting the need for close attention to rate fluctuations. Morfin also mentioned that some clients were considering selling their properties.

Jeff Burns, a senior managing director at Walker & Dunlop LLC, expressed his anticipation for the end of 2023, describing it as a tumultuous year in their industry. At the year’s outset, their primary focus was to transition clients from floating rate deals. They had a brief window in the spring when the 10-year rate briefly hit a low, enabling them to shift clients to five-year fixed-rate loans.

However, the extreme volatility in the treasury market throughout the year made deal management challenging. Rates fluctuated rapidly, making it difficult to assess the viability of deals for their clients. 

Burns mentioned that they even had clients explore the sales market but found cap rates to be less favorable. The team was actively assisting clients facing upcoming loan maturities.

Panelist Bryan Shaffer, principal and Managing Director of Slatt Capital, emphasized the industry’s struggle to endure until 2025, highlighting the limited options available in the current market.

Source: GlobeSt.