CBRE lending index falls to 0.7 as September rates reprice deals

CBRE's Lending Momentum Index ended the third quarter at 0.7, down from 1.0 at the end of June and unchanged from a year earlier, the brokerage said Monday. Connect CRE first reported the figure.

Rates and Treasury yields both rose in September, following what CBRE described as a business-as-usual financing market in July and August. James Millon, president and co-head of capital markets for the U.S. and Canada at CBRE, said the move produced "a repricing across both debt and equity markets for acquisitions, refinancings and recapitalizations, as investors weighed a wider range of potential outcomes amid continued inflation concerns and geopolitical uncertainty."

The equity side of the repricing shows up in loan-to-value ratios, which averaged 64.3% in the third quarter, down from 66.9% a year earlier. On a $100 million asset, the average lender now advances $64.3 million rather than $66.9 million, leaving the sponsor to fund $2.6 million more of equity at the same price.

Multifamily lending moved the other way, with LTVs rising to 66.3% from 64.9%, so apartment borrowers are putting up about $1.4 million less per $100 million. Apartments are also where the refinancing arithmetic is largest: Private Real Estate Daily reported on Nov. 5 that the multifamily refinancing gap totals $6.8 billion.

Millon said capital stayed available through the move. "Despite that volatility, capital remained available and credit continues to attract investor demand because of its yield and income characteristics," he said. "That ongoing appetite for credit should support capital availability even as markets work through near-term uncertainty."