Financing and the Economy: Q&A with NorthMarq’s Keith Braddish

The economy is undergoing some interesting times, with questions focused on how interest rates, inflation and other factors impact commercial real estate. Connect Media recently asked Keith Braddish, NorthMarq Capital’s Managing Director questions about investment sales, economic impact and what might happen in 2018.

Q. How are interest rates, economic conditions and other factors impacting financing?
A. Increasing rates always have an adverse effect on financing as overall costs of capital rise, given that real estate is a good inflation hedge mitigates that a bit. Conversely inflation means that the economy is improving and rental rates should go up. Short-term pain with rising rates is typically tempered as rates will revert to market norms. Wild swings in the equity markets makes investors as well as lenders take pause and reassess.

Q. What’s the most competitive loan to make in this market?
A. I think bridge financing is most competitive at 65%-75%. Lenders are competing for this business and there is a lot of capital pursuing these deals but spreads over LIBOR have risen a bit, and the risk reward in the right markets with the right sponsors are very much accretive to lending portfolios

Q. What’s going on with investment sales so far in 2018?
A. The year, so far, has started slow in investment sales. This quick rise in interest rates affects cap rates as well as reversionary cap rates. Investors will most likely look closer at transactions that have value-add components, although real estate as an asset class will benefit from the volatility in the equity markets. There is abundant capital out there available for commercial real estate.

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