The end of the first quarter of 2018 is quickly approaching. Over the last few months we have seen interest rates continue to climb and are projected to go up through the second quarter based on reports from top economic forecasters.
During this week’s FOMC meeting, the first under new Chairman Jerome Powell, the Fed increased the benchmark index by 25 basis points and signaled the necessity to steepen the path of future increases.
We predict the Fed to hike the Fed Funds Rate two to three more times in 2018. We also see yield curves flattening further in 2018. Both of these are consistent with market indicators. With a perfect storm of factors (heavy T-bill issuance, the U.S. tax overhaul, and the Fed’s policy tightening), we anticipate that short-term rates will eclipse 2.25% by year-end and 1-month LIBOR will likely approach 2.5% by this time next year based upon the Forward Curve.
HOW Q10 KDH CAN HELP: Q10 KDH clients are locking rates on longer fixed rate products for immediate funding and forward commitments up to 12 months. Please contact our team to review current or future investments.
Q10 KDH Vice President, Ryan Watson provided acquisition financing for Fort Bend Center in Sugarland, Texas for the Dhanani Private Equity Group. The property is a Kroger anchored retail center that covers over 42,000 SF of space. The CMBS Lender achieved a loan for 75% of the purchase price and 30 year amortization on a non-recourse basis. The loan closed at a 5.05% rate with 10 years fixed rate financing.
“The Dhanani Private Investor Group was able to see the long-term value in the center given the expansion occurring in the city of Sugar Land, Texas. Many of the tenants have been in the center for over a decade and have realized the growth of the area. Q10 KDH was able to provide the acquisition financing needed for the project and execute a smooth closing processes with a CMBS lender with no surprises.” – Ryan Watson
Q10 KDH Vice President, Larry Peters arranged Fannie Mae DUS financing for a multifamily property located in Houston, Texas.
The financing provided our client two years of interest only and a floating rate with flexible prepayment. The asset received a seven year term and a low interest rate in the mid 3% range.
“The asset was located outside the Houston MSA and many lenders were more conservative due to the location. Our job is to educate the lender and show them the value of looking at the opportunity from a perspective that others don’t. We were able to accomplish the borrower’s wishes by delivering a higher LTV than what the majority of the market was comfortable in quoting but maintain the aggressive pricing that is available for multifamily assets in the market today.” – Larry Peters
We are pleased to provide you with the Q10 KDH 2017 year end Texas Market Update. Our research covers the four major Texas metro areas including Houston, Austin, Dallas/Fort Worth, and San Antonio.
In this report, you will find an overview of the Texas market comparing year end 2016 & 2017 along with the analytical research to summarize the information.
Year End 2017 Texas Market Overview
Ray Driver, Matt Franke & Adam Unger of Q10 KDH arranged financing for Boardwalk at Towne Lake. Boardwalk is a class A mixed use property located in the northwest region of Houston, TX.
Long term fixed rate financing was provided by Q10 KDH correspondent lender, Thrivent Financial. The asset spans over 124,800 square feet for retail, restaurant, and office use.
“KDH has a long relationship with Caldwell Companies, and we’ve witnessed their Towne Lake master planned development blossom since the project’s initial inception. The financing assignment was very specific, and we surveyed a broad spectrum of prospective lenders including banks, private lenders, debt funds and life insurance companies. Working with the borrower, we filtered numerous competitive loan proposals and ultimately selected our correspondent lender, Thrivent Financial, based upon their combination of rate, loan term, and prepayment flexibility. Caldwell secured an early rate lock when the application was signed, and together we processed the loan as a team. Our borrower benefits from a long term fixed rate loan and Thrivent is comfortably secured by the regions’ premier mixed use development.” – Matt Franke
The Q10 KDH team will be attending the Mortgage Bankers Association’s (MBA) CREF18 convention Feb.10-13 in San Diego. We will be meeting with dozens of capital providers who continue to have a strong interest in the Texas markets.
Based on reports from top economic forecasters, interest rates are on the rise as we have already seen a considerable increase in treasury rates in the last 60 days. A recent study by JP Morgan Chase estimated that the Fed will increase rates four times in 2018. Q10 KDH clients are locking rates on longer fixed rate products for immediate funding and forward commitments up to 12 months. Please contact any of our production officers to review current or future investments.
Cash-out refinancing for a self-storage property in north Houston was provided by Q10 KDH Vice President, Larry Peters. The asset contains 155 units located on just over an acre of land.
Larry Peters arranged the financing for his repeat client through a local Texas bank. The loan provided cash-out refinancing with a five year term and a low interest rate in the mid 3% range.
“The repeat borrower for this transaction has a relationship with KDH spanning over 20 years. We were able to establish a new lender relationship for the borrower that provided a more advantageous term and rate than what they could have secured on their own. At the end of the day it opened new doors between the parties and our borrower was able to receive a highly competitive deal by being open to the opportunity.” – Larry Peters
Q10 KDH Vice Presidents Matt Franke and Emily Zarcaro arranged $6.4 million in financing for Texas Wholesale in Northwest Dallas, TX.
Lincoln Financial provided an acquisition loan with a 12 year fixed rate below 4% and 25 year amortization for the single tenant, net leased distribution warehouse which spans 127,000 square feet.
“On behalf of our repeat client, MacDougall & Associates, we were able to secure an attractive 12 year fixed interest rate for this sale-leaseback transaction. MacDougall had been actively targeting attractive investment opportunities in the Dallas market for several quarters, and the borrower moved quickly when this transaction became available. Lincoln Financial was attracted to the loan due to the asset’s excellent location at the intersection of two Interstate highways, the strong tenancy, and MacDougall’s expertise with this asset type. Working together, we were able to rate lock early at an attractive yield to the investors and close in less than 60 days.” – Matt Franke
The next Q10 KDH happy hour is on Nov. 2nd hosted by Emily Zarcaro, CCIM, MBA. Come enjoy a beer with fellow young commercial real estate professionals and get a chance to win Texans tickets! Thank you CCIM for your support and sponsorship.
This event is free of charge and no registration required. We hope to see you there!