{"id":1254608,"date":"2023-04-23T18:10:26","date_gmt":"2023-04-23T22:10:26","guid":{"rendered":"https:\/\/bugaluu.com\/news\/we-scrambled-and-spoke-with-well-over-100-banks-not-one-will-provide-financing\/1254608\/"},"modified":"2023-04-23T18:10:26","modified_gmt":"2023-04-23T22:10:26","slug":"we-scrambled-and-spoke-with-well-over-100-banks-not-one-will-provide-financing","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/we-scrambled-and-spoke-with-well-over-100-banks-not-one-will-provide-financing\/1254608\/","title":{"rendered":"“We Scrambled, And Spoke With Well Over 100 Banks. Not One Will Provide Financing”"},"content":{"rendered":"

“We Scrambled, And Spoke With Well Over 100 Banks. Not One Will Provide Financing”<\/span><\/p>\n

\n

By Eric Peters, CIO of One River Asset Management<\/em><\/p>\n

\u201cCredit started tightening six to nine months ago,\u201d said the developer, a close friend, entrepreneur, with large residential projects across the nation. \u201cIt started with the money center banks,\u201d he continued. \u201cThis pushed us to regional banks for our latest projects, but then SVB happened.\u201d The market froze.<\/p>\n

\u201cThe lender for our latest 30-story project in a tier-one city backed out, so we scrambled, and spoke with well over 100 banks. Not one will provide financing.\u201d <\/strong>His firm is a leader in their market niche. A strong track record.<\/p>\n

\u201cThe Fed is going to have to inject liquidity and slash rates to break this financing freeze on new construction.\u201d <\/strong>Not only have higher rates failed to push home prices down materially, but they are now reducing new supply.<\/p>\n

\u201cAnd here\u2019s something I\u2019ve never seen. When we start a new project, we take out a construction loan. We rush to finish the project, start renting the apartments, repay the loan, and refinance at a lower rate.\u201d The new loans typically have less risk and thus a lower rate than the original construction loans, which are structured with 3yr maturities plus an option to extend for 2yrs.<\/p>\n

\u201cBut now, we have legacy construction loans with a 4.0%-4.5% interest rate, and we\u2019ll extend those out for the full five-year term even though the projects are complete. If we paid them back and refinanced with permanent debt, the rates would probably be 6.5% fixed with no pre-pay option or 8.5%-9.0% floating. <\/strong>There\u2019s no way anyone is going to pay back those low-rate loans that were originated before the hiking cycle.\u201d<\/p>\n

This is a new dynamic for banks. Their low-rate loans are being extended at the same time their deposit base is shrinking.<\/p>\n

\u201cWe developed properties right through the 2008 cycle. What\u2019s unfolding now is something else, new construction is going to hit the wall. The dramatic pace of interest rate increases has flipped everyone upside down,\u201d <\/strong>he said, well positioned. \u201cHappy to sit on vacant lots. I can be patient.\u201d\u00a0<\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nSun, 04\/23\/2023 – 19:30<\/span><\/p>\n

From:Zerohedge<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

“We Scrambled, And Spoke With Well Over 100 Banks. Not One Will Provide Financing” By Eric Peters, CIO of One River Asset Management \u201cCredit started…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1254608","post","type-post","status-publish","format-standard","hentry","category-news","wpcat-1-id"],"_links":{"self":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1254608","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/comments?post=1254608"}],"version-history":[{"count":0,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1254608\/revisions"}],"wp:attachment":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media?parent=1254608"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/categories?post=1254608"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/tags?post=1254608"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}