Episode #90: Critical Lending Environment Updates with Andrew Westling

It’s critical to stay on top of the current lending environment. Joining us today to update us on everything we may have missed is Andrew Westling. Andrew is the Associate Director of Capital Markets at Walker & Dunlop and is well-versed in the world of lending, to say the very least! In this episode, we pick Andrew's brain and discover the effect that the shift from LIBOR to SOFR has had on interest rates, and why floating-rate loans are required for value-add properties! We discuss the respective benefits of bridge loans and fixed-rate loans, the advantages of pref equity over common equity, and the true correlation between interest rates and cap rates. Andrew fills us in on the various alternatives to agency debt and the options to tap into trapped equity! From a lender’s perspective, we find out what sponsors should be aware of, and what lenders expect from them in the current climate. And that’s not all! We cover everything from supplementals to how buyers will most likely adapt to the rising interests rates if sellers fail to do so, and we briefly project into the future to predict 2022’s interest rate hikes. Tune in for this dense yet informative episode on all things lending in the current economic environment!Key Points From This Episode:The work Andrew does as Associate Director of Capital Markets at Walker & Dunlop.How LIBOR has been replaced by SOFR, and how that affects interest rates.Why floating-rate loans are required for value-add properties and what they allow for.The benefits of bridge loans and fixed-rate loans, respectively.The alternatives to agency debt, and what makes it so attractive.How to tap into trapped equity.What a supplemental is and how to use it to your advantage.The advantages of pref equity over common equity.What lenders look for in sponsors and what they should be aware of.Andrew predicts multi-family interest rate hikes for 2022.The true correlation between interest rates and cap rates.Andrew speculates how buyers will adapt to a rising interest rate market if sellers don’t.Tweetables:“Unless you’re in process on a current loan that was quoted under LIBOR and is now transitioning into SOFR, you won’t have much fallout from the change.” — Andrew Westling [0:02:55]“The more inflexible your loan, typically, the bigger [the] discount you can get on the cost of that debt.” — Andrew Westling [0:07:06]“The costs of a transaction on the debt side are essentially the same on a million-dollar deal as it is on a 25 million-dollar deal.” — Andrew Westling [0:12:45]Links Mentioned in Today’s Episode:Andrew Westling on LinkedInAndrew Westling EmailAndrew Westling PhoneWalker & DunlopAsset Management Mastery Facebook GroupBreak of Day Capital Break of Day Capital InstagramBreak of Day Capital YoutubeGary Lipsky on LinkedInBest in Class Garzella Group