The financing landscape has changed more recently as we see that Capitalization rates (the ratio between a Property's Value to its Net Operating Income) are being pushed lower due to several factors, for example foreign capital seeking a "safe haven" investment in multifamily assets.
How has that impacted the debt markets? We are now seeing a shift from a typical Loan to Value (LTV) and Debt Service Coverage Ratio (DSCR) underwriting to the inclusion of Debt Yield. Debt Yield is defined as Net Operating Income of a real estate asset/Loan amount = Debt Yield expressed as a %.
Why is this important? CREfinancing.com does a great job of explaining the importance of Debt Yield. At the highest level, its the metric that is least subject to variables and interpretation. Bottom line is that Debt Yield is part of a new underwriting shift. Public agencies should be aware of this shift when performing their own underwriting analyses, and talk to RSG if you need any help incorporating this into your projects.