FINfacts™ XXIV – No. 356 | February 15, 2023

Prime Rate 7.75%
1 Month LIBOR 4.59%
6 Month LIBOR 5.15%
5 Yr SOFR Swap 3.84%
10 Yr SOFR Swap 3.52%
5 Yr US Treasury 4.04%
10 Yr US Treasury 3.81%
30 Yr US Treasury 3.84%


MBA’s Commercial/Multifamily Convention Highlights

Earlier this week, the George Smith Partners team attended MBA’s Commercial/ Multifamily Finance Convention & Expo in San Diego. We met with dozens of capital providers representing the full spectrum of the capital stack: banks, foreign banks, life insurance companies, pension funds, debt funds, CMBS, private placement groups, and mezzanine/preferred equity providers. Overall conference attendance was exceptional with many newcomers and familiar faces from across the country. Nearly all lenders indicated they had increased capital allocations for 2023. While volatile interest rates continue to weigh on transaction volume, there is plenty of liquidity- especially for favored product types such as apartment, industrial, self-storage, mobile home parks, medical office, and well-positioned retail. Economic fundamentals, such as employment and retail sales, remain strong with hopes of a “soft landing” at the end of the Fed’s tightening cycle. During this time of volatility, inflation, and uncertainty, our couple of days in San Diego were a great time for us to strategize with our lending relationships for 2023.

Permanent Financing:
Permanent lenders continue to be optimistic about 2023 volume demand with the introduction of new lending programs. Bank pricing is coming in around the mid 5s for non-recourse debt on multifamily assets. Leverage is up to 65% of value for commercial properties and 75% for multifamily. Banks are very selective on office. Non-recourse rates sit at 5.50-6.50%. Life Company spreads have tightened as originators flush with new allocations and compete for high-quality assets.

CMBS lenders have securitized the first pool composed of entirely 5-year loan terms. Many borrowers prefer 5-year loan terms now with the hope that rates will decline over the next few years. Most CMBS loans are being quoted with full-term interest only, which provides a workable loan constant.

Construction Financing:
Construction lending remains very active as many sponsors believe they could be building “into the next cycle.” Today’s new projects will (hopefully) come online into a lower interest rate environment. This is anticipated to continue, as many smile markets are undergoing revitalizations and redevelopments of their skylines. For sponsors that are willing to sign recourse, pricing falls in the range of SOFR + 275-375. Non-recourse loans are pricing at SOFR + 500-600. Typical terms fall between 3-5 years (with extensions) with leverage typically at 65% LTC, but we are seeing some lenders push as high as 75% for multifamily.

Bridge Financing:
Bridge lending is competitive and very active. Deal volume should be high this year as many maturing loans will need additional runway to stabilize. The lender pool is growing as new debt funds are being formed unhindered by troubled legacy loans. More and more life companies and pension funds are competing with debt funds in the non-recourse bridge and construction space. These typically “conservative” lenders are attracted by the higher yield. The typical loan term structure is 3 years with 2 x 1 year extensions. Leverage averages about 65%-75% LTC, with multifamily pricing ranging from SOFR + 3s and SOFR + mid 5s. Some competitive bridge programs boasted pricing starting at SOFR + low 3s for best-quality assets. Lenders are willing to push leverage for repeat sponsor relationships.

Mezzanine & Preferred Equity:
Mezzanine loans, B-notes, and preferred equity capital providers will push last dollar leverage up to as high as 80-85% LTV for multifamily. Look for sub debt to emerge as a “rescue capital” solution for overleveraged properties needing more time to stabilize – a typical scenario might require some fresh equity along with the new sub debt.

Lower priced mezzanine or pref can add proceeds above senior lenders for stabilized properties. Agency and life company terms range from 1-10 years and are non-recourse. Many lenders did not have a minimum debt service coverage and some allow open prepayment without penalty. Pricing ranges from SOFR + 5%(bridge) to SOFR + 8% (construction).

Market Overview:
Looking ahead in 2023, market expectations for continued interest rate hikes are prevalent, but lenders have new allocations and need to put out capital. Morale remains positive for 2023 Q3 and Q4. Multifamily and industrial continue to be a preferred asset for lenders. Student housing and self-storage are in high demand for the coming year. Home mortgage rates are sitting at about 6% and discouraging home buyers, thus pushing them to multifamily properties or the rapidly growing SFR build-to-rent space. Retail has made a comeback since 2020- especially grocery-anchored and open-air, well-located strip centers with “daily needs” tenants. Restaurant spending is up as consumers gravitate to well-located “experiential” retail.

Hotels are making a comeback with the return of leisure travel and increased spending on vacations. Business travel is finally picking up, although below pre-pandemic levels. One lender remarked that for the first time, hotels may be passing office in product type desirability. Office metrics continue to present challenges as the industry fundamentally reimagines what the office looks like. Lenders are very wary of standalone office. Office utilization is still at about 55% across the nation and there will be stratification within the product type. Highly amenitized office properties and suburban locations (shorter commutes) will outperform many downtown locations. Life sciences and medical office are in demand. We will continue to see the conversion of office to help meet the national need for residential units. Along with the multitude of debt platforms we heard about, many capital providers introduced JV equity and co-gp arms.

The GSP team enjoyed seeing some of our long-standing capital providers and forging new partnerships throughout the conference. We look forward to implementing our newfound programs and connections into our capital advisory services. Lenders are eager to lend and hope to increase their allocations for the coming year. 2023 is off to a great start, and we look forward to assisting you in obtaining the best financing terms for your commercial real estate financing needs.


If you have an inquiry regarding George Smith Partners’ commercial real estate financing, please contact your GSP representative or Jessica Mania, at (310) 867-2974 or


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