Commercial and Multifamily Market Making a Comeback?

Figures released by the Mortgage Bankers Associationrn(MBA) indicate that commercial and multifamily mortgage market may be comingrnback to life. </p

“The pace of commercial and multifamily mortgage lending continued to increase in the first quarter of this year,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. “Commercial/multifamily mortgage origination volumes for the first threern months of 2011 were the highest of any first quarter since 2002, and were nearly double the volume seen during the first quarter of 2010.”</p

Mortgage originations werernup 89 percent during the first quarter of 2011 compared to the first quarter ofrnlast year and were higher than in the first quarter of any year sincern2002.  Originations were down 25 percentrnfrom the fourth quarter of 2010, but a first quarter fall-off occurred in eachrnof the preceding ten years.  According tornMBA, this is a reflection of the industry’s push to finalize deals before thernend of the year and a resulting drop in first quarter numbers.</p

That the market still has a long way to go, however, is obviousrnfrom the Originations Volume Index.  Thisrnindex compares the current volume for each type of property compared to thernaverage across quarters for the year 2001 which represents a base of 10. The year-over-year increases held across all property types andrnthe quarter-over-quarter decreases for all but industrial properties.  </p

The changes from the two earlier periods andrnthe Originations Volume Index are:    </p<table border="1" cellpadding="0" cellspacing="0"<tbody<tr<td valign="top" width="138"

Property Type</p</td<td valign="top" width="126"

Q1 2011</p

Vol.Index</p</td<td valign="top" width="138"

Changern from</p

Q42010</p</td<td valign="top" width="138"

Changern from</p

Q1 2011</p</td</tr<tr<td valign="top" width="138"

Hotels  </p</td<td valign="top" width="126"

110</p</td<td valign="top" width="138"

450 </p</td<td valign="top" width="138"

-44</p</td</tr<tr<td valign="top" width="138"

Industrial </p</td<td valign="top" width="126"

168</p</td<td valign="top" width="138"

194</p</td<td valign="top" width="138"

  12</p</td</tr<tr<td valign="top" width="138"

Multifamily    </p</td<td valign="top" width="126"

99</p</td<td valign="top" width="138"

104</p</td<td valign="top" width="138"

-28</p</td</tr<tr<td valign="top" width="138"

Office </p</td<td valign="top" width="126"

68</p</td<td valign="top" width="138"

 92</p</td<td valign="top" width="138"

-15</p</td</tr<tr<td valign="top" width="138"

Health care     </p</td<td valign="top" width="126"

50</p</td<td valign="top" width="138"

 91</p</td<td valign="top" width="138"

-83</p</td</tr<tr<td valign="top" width="138"

Retail  </p</td<td valign="top" width="126"

96</p</td<td valign="top" width="138"

 13</p</td<td valign="top" width="138"

-48</p</td</tr<tr<td valign="top" width="138"

All Properties</p</td<td valign="top" width="126"

85</p</td<td valign="top" width="138"

 89</p</td<td valign="top" width="138"

-25</p</td</tr<tr<td valign="top" width="138"
</td<td valign="top" width="126"

 </p</td<td valign="top" width="138"

 </p</td<td valign="top" width="138"

 </p</td</tr</tbody</table

The average loan size increased from that of thernfirst quarter of 2010; in the case of some property types the increase wasrndramatic.  Loan sizes were down from the 4th quarter in 2010 in all cases again, except for office properties.</p<table border="1" cellpadding="0" cellspacing="0"<tbody<tr<td colspan="4" valign="top" width="523"

Averagern Loan Size ($ millions)</p</td</tr<tr<td valign="top" width="138"

Property Type</p</td<td valign="top" width="109"

Q1 2010</p</td<td valign="top" width="126"

Q42010</p</td<td valign="top" width="150"

Q1 2011</p</td</tr<tr<td valign="top" width="138"

Hotels  </p</td<td valign="top" width="109"

$12.3</p</td<td valign="top" width="126"

$50.6</p</td<td valign="top" width="150"

$27.7</p</td</tr<tr<td valign="top" width="138"

Industrial          </p</td<td valign="top" width="109"

9.4</p</td<td valign="top" width="126"

12.6</p</td<td valign="top" width="150"

14.0</p</td</tr<tr<td valign="top" width="138"

Multifamily    </p</td<td valign="top" width="109"

9.4</p</td<td valign="top" width="126"

13.0</p</td<td valign="top" width="150"

11.9</p</td</tr<tr<td valign="top" width="138"

Office </p</td<td valign="top" width="109"

13.4</p</td<td valign="top" width="126"

16.5</p</td<td valign="top" width="150"

17.5</p</td</tr<tr<td valign="top" width="138"

Health care     </p</td<td valign="top" width="109"

3.9</p</td<td valign="top" width="126"

20.7</p</td<td valign="top" width="150"

7.1</p</td</tr<tr<td valign="top" width="138"

Retail  </p</td<td valign="top" width="109"

14.5</p</td<td valign="top" width="126"

18.9</p</td<td valign="top" width="150"

15.1</p</td</tr<tr<td valign="top" width="138"

All Properties</p</td<td valign="top" width="109"

9.2</p</td<td valign="top" width="126"

13.0</p</td<td valign="top" width="150"

11.9</p</td</tr</tbody</table

Originations increased across all investor typesrncompared to the first quarter of 2010.  AmongrnOriginations for CMBS conduits increased 391 percent year-over-year.  Also increasing were originations for liferninsurance companies (126 percent), commercial bank portfolios (73 percent) andrnthe government sponsored enterprises Freddie Mac and Fannie Mae (59rnpercent.)  Originations for commercialrnbank portfolios increased 21 percent compared to Quarter 4 while all othersrnwere down. Originations for conduits for CMBS decreased 58 percent; for liferninsurance companies 15 percent and for the GSEs 45 percent.</p

There was less consistency across the size ofrnloans originated for the various categories of investors during Quarter One ofrn2011 compared to the other two quarters.  rnSome loan sizes declined significantly, some rose, life insurancernoriginations were essentially unchanged.</p<table border="1" cellpadding="0" cellspacing="0"<tbody<tr<td colspan="4" valign="top" width="540"

Averagern Loan Size ($ millions)</p</td</tr<tr<td valign="top" width="138"

Investor Type</p</td<td valign="top" width="126"

Q1 2010</p</td<td valign="top" width="138"

Q42010</p</td<td valign="top" width="138"

Q1 2011</p</td</tr<tr<td valign="top" width="138"

Conduits</p</td<td valign="top" width="126"

45.4</p</td<td valign="top" width="138"

69.6</p</td<td valign="top" width="138"

33.4</p</td</tr<tr<td valign="top" width="138"

Commercial Banks              </p</td<td valign="top" width="126"

4.9</p</td<td valign="top" width="138"

7.6</p</td<td valign="top" width="138"

9.0</p</td</tr<tr<td valign="top" width="138"

Life Insurance </p</td<td valign="top" width="126"

17.0</p</td<td valign="top" width="138"

17.0</p</td<td valign="top" width="138"

17.5</p</td</tr<tr<td valign="top" width="138"

GSEs</p</td<td valign="top" width="126"

9.8</p</td<td valign="top" width="138"

13.5</p</td<td valign="top" width="138"

10.8</p</td</tr</tbody

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