Mortgage Bankers Sense a Rally

Deal flow is on the rise again as life companies and other capital providers re-enter the market.

For Bill Hughes, the difference in the lending climate between this year and last is like night and day. All too often, what began as a promising deal in 2009 fell apart. “Something would come up that would scare the lender,” recalls Hughes, senior vice president and managing director of Marcus & Millichap Capital Corp., a financial intermediary. “The lender may not have come out and said that he really didn't want to do the deal, but all of a sudden loan terms would change and become a lot more conservative.”

Article Tools

Latest News

More Latest News

But 2010 is proving to be a different story. The fear that once paralyzed the commercial real estate debt markets has subsided. Commercial and multifamily mortgage loan originations rose 12% in the first quarter compared with the same period a year ago, reports the Mortgage Bankers Association.

Marcus & Millichap arranged $795 million in commercial real estate financing in 2009. The Encino, Calif.-based company, which ranks No. 14 on NREI's 2010 list of top financial intermediaries, expects deal volume to rise 20% this year.

Loan sizes also are increasing. Marcus & Millichap arranged just one loan over $20 million in 2009. This year the company has already arranged two loans over $20 million and is working on some large deals, “a sign of the future,” says Hughes.

Marcus & Millichap recently arranged a $26.5 million bond refinancing package for the U.S. National Archives and Records Administration. One of this government agency's largest operations, The National Personnel Records Center, occupies a 398,862 sq. ft. Class-A office building in Valmeyer, Ill., 25 miles outside of St. Louis.

The single-tenant building is used to store personnel-related records. The 18-year, fixed-rate loan carries a 5.35% interest rate and is non-recourse.

In some cases, Marcus & Millichap is not only arranging debt financing on maturing loans, but also lining up additional equity to inject into the deals as lenders force borrowers to deleverage.

Waiting on jobs

While lending activity has accelerated, Hughes is the first to admit that it's not business as usual in today's market. Issues like the sovereign debt crisis in Europe and a tepid economic recovery at home still give lenders reason for pause. “I'm not going to sleep really well at night until we see [substantial] job creation in this country and some sustained economic growth. I don't think we're going to get that until we get into the second half of 2011.”

Edward Padilla, CEO of Minneapolis-based NorthMarq Capital, says the U.S. economy needs to generate 200,000 to 300,000 jobs monthly to shore up real estate fundamentals and satisfy investors. In May, the economy added just 41,000 private-sector jobs.

“There is intense competition to buy core assets,” says Padilla. “We're hearing of apartments trading at cap rates of 6% and below again. Class-A apartments and Class-A office are trading at competitive rates, as is industrial. All of that presumes that there is going to be job growth.”

But Padilla doesn't appear alarmed. “Historically, things get bad, then they get better. That's the nature of our economy.” NorthMarq, which originated or arranged $3.3 billion in commercial real estate loans in 2009, expects to close approximately $4 billion in loans this year. The company ranks No. 6 on NREI's list of top financial intermediaries.

The rise in business at NorthMarq has been driven largely by a fourfold increase in activity by life insurance companies, says Padilla. “We're one of those companies that is clearly a survivor in this [cycle]. This is a time when we grow our market share and our company.”

Last fall, NorthMarq completed the acquisition of Opus Property Services, which boasted a management portfolio of 30 million sq. ft. of office, industrial and retail properties. The acquisition complements NorthMarq's mortgage banking and corporate solutions businesses.

Despite the many challenges still facing the lending industry, Padilla is steadfastly bullish. “To tell you the truth, nothing keeps me up at night right now.”

To review NREI’s rankings of the top direct lenders and financial intermediaries, please click below.

2010 Top Direct Lenders

2010 Top Financial Intermediaries



Acceptable Use Policy
blog comments powered by Disqus

Photo Galleries

New York's Star Deals

http://nreionline.com/images/nyc_big_deals_homepage_thumb.jpgThe city that never sleeps is also the city that never stops growing, not even in the midst of recession. And deals, both bold and unprecedented, continue to be done. Check out image of New York's big deals.

Hudson Yards Development

http://nreionline.com/photo_gallery/hudson_yardsCheck out images for Coach's new global headquarters, which will anchor the initial tower of the Eastern Rail Yards site within the 26-acre mixed-

Videos

JLL at ICSC 2012

http://nreionline.com/video/bjorson_thumbnail.jpgCheck out these videos from JLL at ICSC 2012 in Las Vegas...

 

Click here to view more videos.


Blogs


http://nreionline.com/blog/schein_blog_headshot.jpg

Real Vox

Traffic Court

The Full Nelson

Events

Strategic Real Estate Investment Conference

Date: Thursday, June 7, 2012
Time: 7:45AM-6:00PM
Place: 1290 Avenue of the America, 5th Floor
What: A full-day event exploring portfolio diversification through opportunistic and alternative investments....

Click here to view more events...

http://nreionline.com/nrei-300x125-house-091211-resourcebook-jpg.jpg

This Week's Most Popular

Current Issue

http://nreionline.com/april2012_cover.jpg

NREI Newsletters



Retail Traffic Newsletters

View NREI Newsletters

NREI Newsline
NREI Seniors Housing Finance and Development
NREI The Green Sheet
NREI Institutional Outlook
NREI Distressed Real Estate Strategies
NREI Daily/Central
NREI Daily/New York
NREI Daily/New Jersey
NREI Weekender
NREI Global Real Estate Monitor
REIT Insider
Retail Traffic Online
The Site Optimizer

Join the Conversation