Property Types
Multi-Family
Aug 07, 2009
By: Tonie Auer, Southwest Correspondent
Commercial and multi-family mortgage originations haven’t escaped the trickle down of the recession and the credit crunch, with volumes 54 percent below last year's second quarter and 83 percent below the peak seen in the second quarter of 2007, according to the Mortgage Bankers Association's Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.
That isn’t surprising when you look at the fact that apartment property sales continue to slide. During the first quarter of 2009, sales dollar volume was down 55 percent from the previous quarter and 90 percent from a peak in the fourth quarter of 2006, according to the National Apartment Outlook for June 2009, prepared by Marcus & Millichap Research Services.
The number of transactions declined to a lesser degree over the same period, as smaller deals accounted for a greater share of overall activity. Financing properties for more than $15 million has become a considerable challenge, as most lenders are wary of originating large loans and increasing their single-asset risk exposure, the Marcus & Millichap report stated. A handful of large property sales have closed recently, though prices for many of these assets reflect significant discounts when compared to the market’s peak. In early May, for example, the first multi-family REIT acquisition of the year was completed by AvalonBay. The property, located in Bellevue, Wash., traded for slightly more than $33 million, which is 45 percent below the estimated replacement cost, the report stated.
Year over year, total commercial mortgage originations were down 70 percent as of the first quarter; however, the apartment sector recorded a less severe decline due to lending by Fannie Mae and Freddie Mac. Like other lenders, the two government sponsored-enterprises have reduced originations of new multi-family loans over the past year, but by only 26 percent, the Marcus & Millichap report stated.
The 54 percent overall decrease in commercial and multi-family lending activity during the second quarter was driven by decreases in originations for all property types, the MBA information stated. When compared to the second quarter of 2008, the decrease included an 81 percent decrease in loans for office properties, a 77 percent decrease in loans for hotel properties, a 70 percent decrease in loans for healthcare properties, a 65 percent decrease in loans for industrial properties, a 51 percent decrease in retail property loans and a 21 percent decrease in multi-family property loans, the report added.
Among investor types, commercial bank portfolios saw a decrease of 83 percent compared to last year's second quarter. There was also a 57 percent decrease in loans for conduits for CMBS, a 54 percent decrease in loans for life insurance companies, and the dollar volume of loans for government-sponsored enterprises saw a slight increase of 2 percent.
However, the second quarter 2009 mortgage originations were 50 percent higher than originations in the first quarter, the MBA report stated. “Due to the low base of originations in the first quarter, the percentage increases seen in the second quarter are quite dramatic,” the MBA report stated.
Among investor types, loans for conduits for CMBS saw an increase in loan volume of 471 percent compared to the first quarter, loans for life insurance companies saw an increase in loan volume of 46 percent compared to first quarter 2009, GSEs' volume increased by 39 percent during the same time span, and originations for commercial bank portfolios increased 6 percent from the first quarter to second quarter 2009.
Freddie Mac is in the process of securitizing approximately $1 billion of multi-family loans originated in 2008, Marcus & Millichap information stated. The sale of the highly rated securities will mark the first full-scale securitization for the GSE and the first CMBS issuance since the market stalled last June. Compared to the original securitization model, whereby all risk was passed through to investors who purchase the CMBS, Freddie Mac will guarantee the senior bond classes. If its inaugural issue is a success, Freddie Mac could move forward with another securitization of multi-family debt this fall. By shifting a significant amount of debt off its balance sheets, Freddie Mac will be able to free up capital for new multi-family lending, according to the Marcus & Millichap report.
By: Tonie Auer, Southwest Correspondent
Commercial and multi-family mortgage originations haven’t escaped the trickle down of the recession and the credit crunch, with volumes 54 percent below last year's second quarter and 83 percent below the peak seen in the second quarter of 2007, according to the Mortgage Bankers Association's Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.
That isn’t surprising when you look at the fact that apartment property sales continue to slide. During the first quarter of 2009, sales dollar volume was down 55 percent from the previous quarter and 90 percent from a peak in the fourth quarter of 2006, according to the National Apartment Outlook for June 2009, prepared by Marcus & Millichap Research Services.
The number of transactions declined to a lesser degree over the same period, as smaller deals accounted for a greater share of overall activity. Financing properties for more than $15 million has become a considerable challenge, as most lenders are wary of originating large loans and increasing their single-asset risk exposure, the Marcus & Millichap report stated. A handful of large property sales have closed recently, though prices for many of these assets reflect significant discounts when compared to the market’s peak. In early May, for example, the first multi-family REIT acquisition of the year was completed by AvalonBay. The property, located in Bellevue, Wash., traded for slightly more than $33 million, which is 45 percent below the estimated replacement cost, the report stated.
Year over year, total commercial mortgage originations were down 70 percent as of the first quarter; however, the apartment sector recorded a less severe decline due to lending by Fannie Mae and Freddie Mac. Like other lenders, the two government sponsored-enterprises have reduced originations of new multi-family loans over the past year, but by only 26 percent, the Marcus & Millichap report stated.
The 54 percent overall decrease in commercial and multi-family lending activity during the second quarter was driven by decreases in originations for all property types, the MBA information stated. When compared to the second quarter of 2008, the decrease included an 81 percent decrease in loans for office properties, a 77 percent decrease in loans for hotel properties, a 70 percent decrease in loans for healthcare properties, a 65 percent decrease in loans for industrial properties, a 51 percent decrease in retail property loans and a 21 percent decrease in multi-family property loans, the report added.
Among investor types, commercial bank portfolios saw a decrease of 83 percent compared to last year's second quarter. There was also a 57 percent decrease in loans for conduits for CMBS, a 54 percent decrease in loans for life insurance companies, and the dollar volume of loans for government-sponsored enterprises saw a slight increase of 2 percent.
However, the second quarter 2009 mortgage originations were 50 percent higher than originations in the first quarter, the MBA report stated. “Due to the low base of originations in the first quarter, the percentage increases seen in the second quarter are quite dramatic,” the MBA report stated.
Among investor types, loans for conduits for CMBS saw an increase in loan volume of 471 percent compared to the first quarter, loans for life insurance companies saw an increase in loan volume of 46 percent compared to first quarter 2009, GSEs' volume increased by 39 percent during the same time span, and originations for commercial bank portfolios increased 6 percent from the first quarter to second quarter 2009.
Freddie Mac is in the process of securitizing approximately $1 billion of multi-family loans originated in 2008, Marcus & Millichap information stated. The sale of the highly rated securities will mark the first full-scale securitization for the GSE and the first CMBS issuance since the market stalled last June. Compared to the original securitization model, whereby all risk was passed through to investors who purchase the CMBS, Freddie Mac will guarantee the senior bond classes. If its inaugural issue is a success, Freddie Mac could move forward with another securitization of multi-family debt this fall. By shifting a significant amount of debt off its balance sheets, Freddie Mac will be able to free up capital for new multi-family lending, according to the Marcus & Millichap report.
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