Year 2012 will see a continuation of improving lending conditions if commercial real estate values stabilize and borrowers find stable footing in the markets. Owner-occupied properties, multifamily and stabilized, cash-flowing investment real estate will be the favored property categories. Development and construction will still be industry laggards. Private lending for business and real estate deals has blossomed in the past year as investors flee from the stock market looking for more sensible, safe, dividend-type investment vehicles. No longer does private money always equate to near usurious interest rates and multiple point originations.
Industry experts expect Small Business Administration (SBA) lending to be active in 2012, particularly SBA 504. “I see a rush of SBA 504 refinances prior to the program’s scheduled end in September 2012. But I also wonder if the program will be extended or made permanent, a move that would make sense to me. On the other hand, the U.S. government does not seem capable of passing any legislation that makes sense, so I am not holding my breath,” says Michael D. Sneden, Executive Vice President at ValueXpress.
Government-sponsored multifamily programs (Fannie Mae, Freddie Mac and HUD) will continue to dominate the multifamily sector. CMBS conduit loans will creep back into the lending forefront for multifamily properties that are ineligible for government-backed originations. Both of these options will provide excellent debt capital flux into the multifamily sector overall. In addition, small-balance portfolio loan programs exist in the multifamily arena, making this property type a continued favorite of mine for smaller RE investors.
Commercial Mortgage-Backed Security (CMBS) conduit programs, which virtually disappeared a couple years ago as the secondary market dries up, should increase for 2012. But don't expect them to increase by leaps and bounds. "The CMBS market as a whole generated about $30 billion in CMBS loans in 2011 [a fraction of the 2005 - 2008 hay day], will grow to about $50 billion in 2012 [still a fracture of the peak volumes],” say Sneden.
In summary, although we saw some traction in commercial lending in 2011 compared to 2009 and 2010, the progress was slow. I credit this progress much less to sane lenders' origination policies and more to credit-worthy borrowers coming out from under the woodwork. So in 2011, the commercial lending market improved for stabilized, income-producing and owner-occupied real estate, albeit very slowly. In 2012, we would expect to see more loan originations as additional lending sources open up and existing lenders bring more sanity into their lending practices.
Industry experts expect Small Business Administration (SBA) lending to be active in 2012, particularly SBA 504. “I see a rush of SBA 504 refinances prior to the program’s scheduled end in September 2012. But I also wonder if the program will be extended or made permanent, a move that would make sense to me. On the other hand, the U.S. government does not seem capable of passing any legislation that makes sense, so I am not holding my breath,” says Michael D. Sneden, Executive Vice President at ValueXpress.
Government-sponsored multifamily programs (Fannie Mae, Freddie Mac and HUD) will continue to dominate the multifamily sector. CMBS conduit loans will creep back into the lending forefront for multifamily properties that are ineligible for government-backed originations. Both of these options will provide excellent debt capital flux into the multifamily sector overall. In addition, small-balance portfolio loan programs exist in the multifamily arena, making this property type a continued favorite of mine for smaller RE investors.
Commercial Mortgage-Backed Security (CMBS) conduit programs, which virtually disappeared a couple years ago as the secondary market dries up, should increase for 2012. But don't expect them to increase by leaps and bounds. "The CMBS market as a whole generated about $30 billion in CMBS loans in 2011 [a fraction of the 2005 - 2008 hay day], will grow to about $50 billion in 2012 [still a fracture of the peak volumes],” say Sneden.
In summary, although we saw some traction in commercial lending in 2011 compared to 2009 and 2010, the progress was slow. I credit this progress much less to sane lenders' origination policies and more to credit-worthy borrowers coming out from under the woodwork. So in 2011, the commercial lending market improved for stabilized, income-producing and owner-occupied real estate, albeit very slowly. In 2012, we would expect to see more loan originations as additional lending sources open up and existing lenders bring more sanity into their lending practices.
