Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
Issue link: http://cire.epubxp.com/i/143044
2013 Rates and Leverage Insurance Companies. Life insurance companies closed 18.1 percent of 2012's comLife mercial real estate loans, according to MarCMBS cos. GSE Bank SBA Bridge cus & Millichap and Real Capital Analytics Interest rate (%) 4.3 – 5.0 3.5 4.0 3.25/5yr 4.0 5.0 – 8.0 reports, and they are expected to increase commercial real estate allocations by 15 Loan to value (%) 70 – 75 65 75 70 90 70 percent this year. Life companies ofer an Source: Mortgage Bankers Association average LTV of 65 percent and 10-year fxed pricing in the high 3 percent to low 4 percent range. While maintaining their conservative reputation, many life companies such as StanCorp Financial Group, Small Business Administration. Te SBA is expected to remain Symetra Financial, and Ohio National Financial Services are look- on pace with 2012 originations this year, with only a slight dip from ing to pick up market share by ofering smaller loan amounts and 2011's numbers — considered a banner year due to a number of stimulus eforts that reduced fees, expanded loan guarantees, and raised becoming more aggressive on overall proceeds. Banks. Post-credit crisis, the banking community has remained loan amounts. Te SBA's 504 program ofers lenders, particularly a small group, with local and regional survivors consolidating in portfolio lenders, the opportunity to make 50 percent leverage loans, part to comply with new regulations. Tese new rules require larger which helps to maintain a low weighted average LTV on their overall capital reserves, which may afect the amount of commercial real portfolio. Tese frst trust deeds, combined with a 40 percent SBA estate assets banks will choose to hold. National, international, and second trust deed, currently a 20-year term fxed at 4.16 percent, ofer regional banks accounted for roughly 25.5 percent of all commercial borrowers a combined LTV of 90 percent with a low blended rate. Te real estate loans last year, according to Marcus & Millichap and RCA. SBA's 7(a) program enables lenders to provide small businesses a 90 Despite an increased appetite for commercial real estate loans, percent leveraged frst trust deed on real estate up to $5 million with banks remain conservative with underwriting criteria: Ofen, they an SBA guarantee to 75 percent of the loan balance. Tis guarantee are more eager for banking relationships and the sale of ancillary ser- is particularly important, as many lenders are selling the guaranteed vices than for stand-alone commercial real estate loan transactions. portions on the secondary market at tremendous premiums, which Some banks now ofer nonrecourse fnancing to strong borrowers, replenishes the lender's liquidity, reduces their exposure, and encourwhile most stick with three- to fve-year fxed terms in anticipation ages even more small-business lending. Bridge Loans. Many lenders are entering the bridge fnancing of rising interest rates. Government-Sponsored Enterprises. Despite huge increases in market with aggressive terms for empty buildings, unseasoned multifamily acquisitions and record low interest rates, the Federal properties, discounted note payofs, and buildings needing funds Housing Finance Agency's 2013 strategic plan decreases Fannie Mae for tenant improvements, leasing commissions, and minor or major and Freddie Mac lending. Under the new directive, Fannie and Fred- rehabs. Terms range from two to three years at 65 to 75 percent LTV, die's combined multifamily lending will shrink from $63.3 billion in with rates at 5 to 6 percent with local banks and 7 to 10 percent with 2012 to $56.9 billion in 2013. bridge and private lenders. While Fannie Mae lenders like Walker While this news may have little impact on existing GSE borrowers, & Dunlop, Wells Fargo, and Berkadia Commercial Mortgage ofer other lenders may see an opportunity to expand market share in the aggressive bridge loans for larger balance loans to win the take-out healthy multifamily sector, particularly among new borrowers in fnancing, non-bank entrants such as ReadyCap Commercial, A10 secondary and tertiary markets. Fannie Mae lenders such as Arbor Capital, and Emerald Creek Capital are aggressively originating loans Commercial Mortgage, Centerline Capital Group, and Greystone of $10 million and less, Crittenden reports. Servicing Corp. ofer 10-year loans to 80 percent LTV in the low 4 Finishing Strong? percent range starting at $1 million. Te fnancing outlook for the remainder of the year is somewhat mixed. While there is signifcant capital in the market for the right projects in the right locations, rising interest rates are a wild card, and credit is still tight for those projects that are too small, too weak, in billions or too far away to get the attention of the big players. New entrants should address some of the projects that are currently struggling Other to fnd fnancing over the coming months. If 2012 (and history) is Life dedicated an indicator, fnancing activity is likely to surge by the end of 2013. CMBS cos. GSE/FHA CRE lenders Total Lender Volume 2012–2013 2012 $32 $49 $82 $65 $228 2013 $55 $49 $75 $75 $254 Source: Mortgage Bankers Association CCIM.com Elizabeth Braman, CCIM, is chief production officer at ReadyCap Commercial in Irvine, Calif. Contact her at elizabeth.braman@ readycapcommercial.com. July | August | 2013 35