RC Patterson & Co.

09/27/2025

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09/27/2025

Reposting from 2 weeks ago.
Everyone refers to SOFR, but it's important to understand the differences between SOFR, 30-Day Average SOFR, and 1-Month Term SOFR.

SOFR - The overnight rate based on actual repo transactions, reflecting the cost of borrowing cash overnight collateralized by Treasuries. It resets daily and can be volatile, especially around month-end or quarter-end.

30-Day Avg. SOFR - A backward-looking average of daily SOFR over the past month. It smooths out that daily volatility and moves more gradually. Freddie and Fannie use this as the index for their floating-rate loans.

1-Month Term SOFR - A forward-looking rate based on futures contracts. Instead of averaging past data, it’s the market’s expectation of where SOFR will average over the next month. Most floating-rate lenders use this index.

The chart below shows how 1-Month Term SOFR and 30-Day Average SOFR tracked almost identically around 4.32% for most of the year.

However, the market's expectation for a rate cut clearly shifted on August 28th, and 1-Month Term SOFR has been steadily declining each day in anticipation of the Fed lowering short-term rates on September 17th.

1-Month Term SOFR will likely decline ~2 bps each day for the next 10 days until it reaches ~4.00% and lines up with a Fed rate cut of 25 bps.

For rhoae that call and message me about why mortgaes bumbed, Mortgage rates are different — here's why

Mortgage rates are longer-term debt, as anyone with a 30-year home loan knows. That's a very long debt runway. The fixed rate you pay is evergreen, with a margin built in to last through many interest rate cycles.

That means it's priced to a longer-term benchmark, such as the 10-year Treasury.

The bond market generally reacts to longer-term events, such as inflation, employment, and macroeconomic trends.

Sometimes, mortgage rates fall after a Fed rate cut. Sometimes,​​ they don't. Many times, they'll decline in expectation of falling short-term interest rates in the weeks leading up to a Fed meeting. Then, occasionally, they bounce back up.

In fact, weekly 30-year fixed mortgage rates generally began dropping on May 29, 2025, from 6.89% all the way down to 6.26% by Sept. 18. The Fed cut rates on Sept. 17, and rates bounced up to 6.30% on Sept 25. I’m calling this a wait and see pattern. Inflation is still a concern for many, job growth others, and politics as usual. But if I had a crystal ball, equities soar, new wealth being generatedd will find some of their cash flying to safety in treasuries as a safe hedge, drive price down. A 6% rate with bullish equity market full of new opportunities could be equivalent to having a 3% rate. Be happy with 6% but also be playing on the other side and take advantage of opportunities to increase your revenue. I’d take a short / long /hybrid term 10% mortgage rate on an investment today, but what’s that doing for me (its doong alot for many) and how flexible can we all be stick and move. Granted a long term 10% rate for a consumer buying a home, this narrative doesn’t fit. 6-7% ain’t bad, just make sure you are looking to make more money and invest. So when your eggs cost more, and imported parts are getting you down, don’t worry, shelter cost and an abundance of investment opportunities are right at your fingertips tips. No, not depositing into FanDuel. Maybe delosit into their stock instead.

09/27/2025

Earlier this week I spoke to the founder of a new debt platform that's focused on multifamily lending for "institutional middle market clients", i.e. sponsors that own at least a couple thousand units and would be financeable by the agencies. They have two programs:

1) Bridge Lending - Loans sizes $20M and up. They have full discretion below $80M, but can do larger as well. Can size as low as a 6.5% stabilized debt yield in low cap rate markets. Maxing out at 75% LTV. Pricing is in the mid-to-high 200's. They have a $1B+ allocation for this program.

2) Fixed-rated Lending - Loan sizes $15M to $60M. The goal here is to provide more proceeds than the agencies, but at a higher spread. e.g. Size to a 7% in-place debt yield and 75% LTV. Pricing in the low-to-mid 200s over the 5-year treasury with a 0.25% origination fee. Full-term I/O.

They don't have a construction bucket yet, but plan on rolling that out in 2026. The more you know. Comment your email address for weekly Deal Maker newsletter.

09/27/2025

Yesterday I had 6 calls before noon. Here's what I've learned: Im not saying don’t call me at the bank, part of my job is working with all other types of investors globally outside the bank -within my “Investor Relations” capacity. There is a large capital market echosystem that is alligned in what they want to invest in and the more the debt or equity seekers know, the better. If these scenerios hit home, and you would like more info, comment email addresss for newsletter.

1) Debt Fund
- Targeting $40M+ stretch senior bridge and construction loans.
- Sizing up to 85% LTC for construction and 80% LTC for bridge
- Multifamily, condo, hospitality
- Bridge pricing is SOFR + 2.75% to 3.50%
- Construction pricing starts at SOFR + 4.50%
- They're finding a lot of success in high leverage recaps of deals that were purchased in 2021-2023 and need more time.
- They like 1970-1995 workforce housing deals.
- Can do predev land loans with pricing starting at SOFR+5.50%
- I'll add them to the Lender Spotlight section of Monday's newsletter

2) Family Office
- They want to invest ~$50M per year in small stretch senior construction loans. Could be multifamily, BTR, horizontal lots, etc.
- They were considering starting their own debt platform, but I suggested it may be easier to provide this capital allocation to a lender that's already active and has created the brand and infrastructure to make these loans.

3) CTL Lender
- Our call was to discuss the possibility of providing CTL financing for office buildings.
- It's possible, but the loan term needs to be co-terminus with the lease term. e.g. If you have a 20-year credit lease, then it'll be a 20-year loan term with 20-year amortization.
- The loan will be sized based on the PV of the rental stream including rent bumps, using the interest rate as the discount rate.
- The best possible spread today for the top companies is 1.25-1.30%. The index will be the average life treasury.
- No origination fee

4) MF Developer
- In terms of buying land today, they're finding more success by partnering with the existing owner instead of an outright sale.
- Typically sizing to an untrended ROC around 6.25% - 6.75% depending on the market.
- May want to recap some of their lease-up deals so they can recycle the equity into their other ground-up development deals.

5) MF Operator
- Closing their 4th deal of the year in a few weeks. Going-in above a 6.0% cash-on-cash with large upside and were over-subscribed on the syndicated equity raise.
- In order to scale the company, they're considering bringing in an institutional partner to recap their existing portfolio and provide some dry powder to continue to buy 3-5 deals each year.

6) Family office
- They have a trophy office building where the major tenant just vacated.
- This is a property they want to hold long-term, so they're going to pay off the existing loan with cash.
- Once they've signed new credit tenant leases, they want to place bridge financing on the property to pay for the TI's. They'd prefer to work with a lender that would provide an earn-out with each new lease.
- The property is currently cash flow positive with the existing tenancy, which is investment-grade and has over 10 years of term remaining.
- They're seeing that tenants want nice space and will pay for it, they're just taking less of it than before. 📈

09/27/2025

Tip of the day.
Hi. Many lenders focus on stabilized debt yield because it shows how much cap rates can rise before a property sale no longer covers the loan.

For example, a lender sizes their loan to an 8.0% stabilized debt yield in a 6.0% cap market, if cap rates rise 200 bps to 8.0%, then the value of the property will match the loan amount.

Stabilized Cap Rate ÷ Stabilized Debt Yield = Stabilized LTV

6.0% ÷ 8.0% = 75% LTV

This is why debt yield sizing requirements vary based on market. If a lender is underwriting a sale as their form of repayment (not a refi), then they'll likely be willing to size to a lower debt yield in a lower cap rate market.