Higher Interest Rates

January 22, 2015

Would a rise in interest rates affect the coming wall of maturities? Tom Fink states that if interest rates were to go up substantially (anywhere from 4 to 6 percent), that would provide an issue for the marketplace in general because of the uncertainty of the volatility. With regard to the loans that are maturing in 2016 and 2017, they are being refinanced at rates that are comparable or lower than they were financed with originally in 2006 and 2007.
 
Where interest rates are today and where they are probably going to be in 2016 is a “wild card” depending on what happens in the 2016 election. How is the real estate market going to read whatever happens in that election, the overall level of interest rates and the prospects going forward? The fact of the matter is that there’s still a large surplus of capital in the market. People are looking for investment options, and real estate appears to be a safe investment.


Transcript

Aaron Kaiser: Hello, I'm Aaron Kaiser, partner at EisnerAmper and Co-Chair of our firm's Real Estate Practice. It's my pleasure today to introduce Tom Fink, Senior Vice President and Managing Director of Trepp LLC. Trepp was founded in 1979 and is the leading provider of information analytics and technology to the commercial mortgage back securities, commercial real estate and banking markets. Welcome. How do you feel a rise in interest rates might affect the coming wall of maturities?
Tom Fink: Well, I think interest rates, if they were to go up substantially, and by substantial, I mean take the 10 year treasury from around two, two and a quarter to four or five, six percent.

That would, I think provide an issue for the marketplace in general more because of the uncertainty and the volatility. With regard to the loans that are actually maturing and U.S. In 2016 and 2017 there being refinanced at rates that are comparable or lower than they were financed with originally in 06' and 07', so where interest rates are today and where they are probably going to be in 2016, I think we're going to be okay. I think the real wildcard is what's going to happen with the 2016 election, how is the market going to read, whatever happens in that election and how are they going to make that feel about the overall level of interest rates and the prospects going forward. The fact of the matter is there's still, as I said earlier, a real large surplus of capital in the market. Now you've got people who are looking for investments. Real estate looks to be a safe investment, so I don't see us having any problem of raising the capital necessary of equity and debt to go through the upcoming loan charities. That's what I see today.
Aaron Kaiser: Tom, thank you very much for your insights and thought leadership.
Tom Fink: Aaron, it was my pleasure. I always liked working with you and the folks at EisnerAmper.
Aaron Kaiser: Thank you so much. For more information go to EisnerAmper.com

About Aaron Kaiser

Aaron Kaiser is an Audit Partner and member of the Professional Practice Group and a leader in the Real Estate accounting services group.

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More Videos in This Series

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International Question

After discussing New York, Tom Fink discusses markets around the world from an equity perspective and how there's an awful lot of money is still available for pursuing equity investments in real estates around the globe in terms of debt.

Domestic Findings

The New York real estate market is doing relatively well. How is New York doing compared to the country as a whole? Tom Fink illustrates by showing the nation sectioned into regions and shows the delinquency rate in each region.

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