
Interest Rates Depress Hotel Capital Markets Activity
With construction debt rates well north of 10 percent, you need aggressive assumptions for development underwriting to yield an attractive return.
With construction debt rates well north of 10 percent, you need aggressive assumptions for development underwriting to yield an attractive return.
Some contracts that rely on LIBOR need a replacement rate by the time LIBOR goes away next year, but are tough or impossible to modify. Fortunately, there’s a solution that requires little effort.
While lenders began 2021 anticipating some interest rate increases this year, the changing rate environment in recent weeks has added another challenge to commercial real estate lending.
The London Interbank Offered Rate was a widely accepted benchmark interest rate among financial institutions for over 40 years. One worldwide scandal and a handful of years later, it’s set to start expiring in a few days.
At Brookline Bank, our strategy for the transition has been similar to the preparation for Y2K: So far it is going smoothly, but not without an enormous amount of planning and cross-departmental teamwork.
Imagine you sign a contract and later learn that one of its key financial underpinnings will be replaced by something unknowable. That is the reality if you enter into a financial transaction involving the London Interbank Offered Rate, or LIBOR.