Thursday, February 23, 2012

Real Money: More Capital Expected To Flow to CRE - CoStar Group

National Retail Properties, COPT, Equity One, Rouse Among Several Raising Capital
February 22, 2012

A number of lenders see more capital coming back into commercial real estate in 2012 in much greater volumes and across multiple lending sources.

All of the 20 institutional lenders with whom Jones Lang LaSalle met with during last week’s Mortgage Bankers Association conference in Atlanta indicated a stronger appetite or allocation for placing commercial real estate mortgages in 2012.

Jones Lang LaSalle also partnered with Penton Media Research on a proprietary survey that compiled feedback from 186 borrowers and 136 lenders that together comprise a total median $73.3 million in commercial real estate asset value.

In the survey, lenders reported positive expectations for 2012 funding aims including a 12% uptick in expected capital placement this year.

"We expected to hear bold predictions from all of the lending sources along the capital stack and they didn't disappoint with strong inclinations to place commercial real estate debt," said Tom Fish, co-head and executive managing director of Jones Lang LaSalle's real estate investment banking business. "We were pleasantly surprised with lenders' acceptance of risk as more indicated they had cash flow for the secondary markets and property types, indicative of lenders moving up the risk curve."

"While absolute borrowing rates are at historic lows, lenders view commercial real estate mortgages as attractive investment opportunities versus alternative bonds or other fixed-rate alternatives. That should result in larger allocations to commercial real estate this year from life companies, commercial banks and CMBS originators," added Mike Melody, the other co-head and executive managing director.

The lenders Jones Lang LaSalle surveyed agreed, indicating an increasing trend that has been on the move the past two years. Lender financing in 2011 increased an average 11% over 2010. Lender respondents expect 2012 financing to increase even more with a 12% improvement over 2011.

    2012 lender expectations highlights were as follows:
  • Financing in 2011 increased an average 11% from 2010. Respondents expect 2012 financing availability to increase 12% over 2011.

  • Apartments represent the best investment opportunities as 76% chose the product type. Another 48% of lenders worry the most about hotel loans.

  • Lenders indicated that 62% of loans closed are for long-term and 38% are for short-term loans. Those percentages aren't expected to move much with 2012 long-term expectations at 64% and short-term at 36%.

  • Following a volatile 2011, CMBS originators are back in the market in a big way in 2012, as volumes are expected to rise as high as $50 billion this year.


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Real Money: More Capital Expected To Flow to CRE - CoStar Group

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