SPECIAL FOCUS: CAPITAL MARKETS OUTLOOK 2008

APARTMENT FINANCE TODAY • JANUARY 2008

Advice for Apartment Owners:
How to Prosper in Tumultuous Times

1 Make sure your business plan provides for a worst-case scenario. What will you do if liquidity does not return quickly, and the value of your holdings erodes quicker than anyone anticipated? What if planned deals fall through, or you find it harder to get financing?

2 When you read an economic or real estate market forecast, consider the source. Many people have a vested interest in being optimistic and keeping values and deal flow up.

3 If you are considering staying in construction or mini-perm loans rather than going with permanent loans, be very careful. Smart borrowers expect volatility to continue for most of the year, so try to lock in a rate as early as possible.

4 Allow more time to line up financing. With the conduits on the sidelines, Fannie Mae, Freddie Mac, and portfolio lenders are swamped, and they will take a while to look at a new customer’s deals.

5 If you are looking to buy, be prepared to prove that you have access to financing and can close quickly. It will help to have your own cash or a solid source of equity.

6 Finally, be kind to your local mortgage banker or broker. When conduits were offering generous loan proceeds at very attractive rates, who needed any help structuring a deal? Now many borrowers are recognizing the value of a good relationship with a capital markets expert.