Rising Interest Rates Concern Apartment-Building Owners, Renters

The Wall Street Journal recently spoke with David Brickman, Chief Executive Officer at NewPoint Real Estate Capital, about the relationship between interest rates, rents and building values:

"If interest rates rise faster than rents, building values are likely to fall and owners may come under pressure when their mortgage matures, according to David Brickman, CEO of real-estate finance company NewPoint Real Estate Capital and former head of housing-finance company Freddie Mac.

Investors have been routinely buying apartment buildings at capitalization rates as low as 3.5%, he said.

But mortgage rates on some of these deals have now risen above 4.5% as the Federal Reserve tightens monetary policy to fight inflation. While he doesn’t expect a wave of defaults, Mr. Brickman said some lenders to apartment owners might come under stress.

'There’s no question you’re going to have rent growth; the question is whether it will outpace interest rates,' he said."

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"Rising Interest Rates Concern Apartment-Building Owners, Renters"

– May 24, 2022