2011 Commercial Mortgage Bankers Association
Conference Highlights
By: Sam Berns, Managing Director, Upstate New
York Office
This year’s Commercial Real Estate Mortgage Banker’s
Conference was held in February in San Diego. Last year
we reported that the conference was more upbeat than the
“doom and gloom” that permeated the 2009 conference.
This year’s conference was characterized by buzz words
such as “Cash Flows,” “Income in Place,” and “Lease
Rollover.” This can only mean one thing...lenders, and
more importantly lending, have returned to the
marketplace!
Over 3,000 attendees participated in this year’s
conference including representatives from Life Insurance
Companies, Agency Lenders, Bridge Lenders, and
Commercial Mortgage Backed Securities (CMBS) Lenders.
NorthMarq Capital had attendees from 32 offices
nationwide, as well as, from our Amerisphere Multifamily
Finance Group.
FNMA and Freddie Mac continued to provide multi-family
financing throughout 2010. These Government Service
Enterprises (GSE) have almost an exclusive “lock” on
this market throughout 2010; However, 2011 appears to be
a different story. Life Insurance Companies are back in
the market and are being extremely aggressive for lower
loan to value transactions. In addition, the return of
CMBS lenders to the lending arena is providing plenty of
competition to the GSE’s. In 2011, both Life Companies
and CMBS lenders will be adding to the liquidity
previously only provided by the GSE’s.
Following the demise of the CMBS marketplace in
2008-2009, this latest go-around is exhibiting true and
tougher underwriting standards. Some are referring to
this Wall Street lending market’s resurgence as CMBS
2.0. Loan to values are 75% or less, debt service
coverages remain over 1.25x and Tenant Improvements and
Leasing Commission/ Replacement Reserves are the new
underwriting orders of CMBS 2.0. It is anticipated that
CMBS lenders will be a major player in the commercial
real estate market as 2011 continues. Many of the CMBS
2.0 lenders are backed by the largest of the nation’s
financial institutions. At this time, many of the CMBS
players are focusing their efforts on larger trophy
properties in larger metropolitan areas. Many of these
lenders are focused on transactions in excess of $10.0
million. As CMBS lenders become more accepted in the
marketplace, we anticipate this minimum loan amount to
drop. Currently, there are only a few CMBS lenders
working in the $3.0 million and over spectrum.
In a March 2011 Co-Star Group article, Mark Heschmeyer
tenders his belief that even with the return of Life
Company and CMBS Lenders, the market will be bifurcated.
His basic premise is that cash-rich borrowers will
continue to get credit while smaller and medium sized
borrowers will have trouble. Heschmeyer points to a
recent paper published by Delotte, LLP entitled, A Tale
of Two Capital Markets. The article asserts that cash
for lending is unevenly distributed and borrowing was
becoming easier for only the largest of investors,
developers, and companies. This may have been true in
late 2010, but we believe that commercial real estate
loans are obtainable for most transactions at this time
in 2011. At this year’s conference, Regional Banks, Life
Companies, CMBS Lenders are purporting increased
allocations for commercial real estate. Most traditional
product types are being financed with hotels being an
exception. Most hotel lenders are limiting financings to
full service hotels in major metropolitan areas. Loan to
values are averaging 65%. We expect loan to values for
all product types to continue to increase as the
recovery takes hold.
Incredible as the resurgence of CMBS lending may appear,
what may be even more remarkable is the re-emergence of
Mezzanine Lending. Both FNMA and Freddie Mac have
established Mezzanine or B-Piece loan programs. These
programs are designed to help investors to reach higher
levels of loan proceeds, especially for acquisitions.
CMBS Lenders are also coupling the debt stack with
B-Loans in an effort to obtain higher loan to value.
Well, it sure feels better in 2011 than it has for the
last several years. Hopefully, overtime, we will look
back at the recent recession caused by financial and
housing upheavals as another cycle that could have been
avoided. Perhaps the same mistakes that contributed to
the last downturn can be avoided. Lenders will proceed
cautiously and patience will be required in order to
avoid more mistakes as our commercial real estate
lending markets crawl back into the new recovery cycle.
The future is brightening, albeit, slowly.
__________________________________________________________________________________________________
Sam Berns is senior vice president and managing
director in NorthMarq's Rochester, NY office and can be reached via email at
sberns@northmarq.com.
This article first appeared in the
April 26, 2011, edition of the Upstate New York Real
Estate Journal.
NorthMarq offers commercial real estate services,
including transaction and advisory services, real estate
management, and debt and equity placements, to investors
and occupiers of commercial real estate from its
headquarters in Minneapolis. The company manages more
than 60 million sq. ft. of retail, industrial and office
assets in 22 markets around the country, handles more
than 7,500 transactions annually and provides real
estate debt and equity financing, and commercial loan
servicing in 32 offices coast-to-coast, with an average
of $7 billion in annual production volume and services a
loan portfolio of more than $40 billion