The cost of financing apartment acquisitions and refinancing maturing apartment loans held to record-lows in the fourth quarter. Across new mortgages made by banks, life companies, CMBS conduit originators, and through the sector-dominant agencies, average interest rates for fixed-rate financing generally ranged between 3 and 4 percent†.
Apart from rock bottom Treasury yields, historically low mortgage rates reflect continued strength in apartment cash flow trends and competition amongst lenders to fund deals. Debt yields, the ratio of property net operating income to origination loan balance, were 9.0 percent in the quarter. For deals backed by loan balances above $25 million, the average debt yield was up to 100 basis points lower.
Read more...Q4 2012 Apartment Debt Trends | Chandan Economics