Fannie, Freddie Spreads Have Widened But Pricing Is Still Competitive
- Aug 21, 2008
Avi Weinstock (pictured) is a partner and executive vice president at New York-based mortgage brokerage firm, Meridian Capital Group. As head of Meridian’s multifamily property division, Weinstock and his team have closed over 2,000 transactions annually since 2004, generating a deal volume in excess of $10 billion per year in closed loans.Weinstock talks to MHN Online News Editor, Anuradha Kher about the comeback of conduits, the direction in which capital is headed and his advice for borrowers.MHN: What kinds of deals are getting done in today’s market?Weinstock: A variety of multifamily deals are getting accomplished in today’s market. What has changed is the amount of leverage being offered and that has much to do with the way that a lender is prepared to view projections and lend against them. But for any given property, you still have a host of lenders competing to provide financing. MHN: Has the loss of confidence in Fannie and Freddie widened the spreads on the companies’ loans?Weinstock: Spreads have clearly widened in response to everything we’re reading about every day in the news. But pricing is still extremely competitive. MHN: How much has Meridian closed through the end of July this year?Weinstock: Meridian has managed to close more than 500 transactions and $2.1 billion in agency multifamily loans through the end of July this year.MHN: What do you think will happen with spreads?Weinstock: I am wise enough to avoid making any concrete predictions, but I certainly hope they will come down a bit or at least stabilize.MHN: Where are we in terms of the financial crisis? Recovering, still worse to come…?Weinstock: I believe we only have just begun to recognize how many mistakes were made over the past 10 years and the devastating effects that those decisions are now having on us. Just the same, there are still so many great opportunities that lenders want to lend on. There is no shortage of good sound real estate and responsible owners–and all of the banks bidding for that business. There will be some tough times ahead, but the stabilized multifamily market should be less affected than other sectors.MHN: Will conduits come back and when?Weinstock: They have already started to “come back”. But if “coming back” entails going back to 90 percent financing with 10-year interest-only terms with debt servicing in year five, then we may be years away from that sort of comeback. For the right product, of course, conduit lenders are still open for business.MHN: What direction is the availability of capital headed?Weinstock: The availability will be there, it just may not be with the same players who have been active over the past 36 months. The next 18-24 months will definitely be interesting to track.MHN: What advice do you have for borrowers?Weinstock: There are a lot of unknowns in this business. Where are real estate values going? Where are energy prices headed? How will the elections affect your real estate income? If borrowers can secure financing amid this turbulent market, they should take advantage of a good opportunity.