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CRE Finance World, Winter 2014

outpace alternative sources as the GSEs reduce production — particularly given the increasing number of borrowers that face CMBS loan maturities in the coming years.7 This is especially true of borrowers that experienced difficulties during the downturn, making it more challenging to find competitive financing from banks and insurance companies. Acquisition financing will also be a source of growth for the sector given property sales volumes, which have increased by more than 67% year over year through October according to Real Capital Analytics. Given the growth is occurring while private lending volumes are on the upswing, it is inevitable that it will also help fuel conduit originations. In conclusion, we think it is evident that private lending sources will experience continued growth in multifamily lending as the GSEs reduce their commitment to the space. Conduits are well positioned to participate in this growth, provided the spread environment doesn’t impede conduit lenders’ ability to offer attractive financing rates. Multifamily fundamentals will also inevitably play a role in overall financing volumes, and while it isn’t clear the sector’s outsized performance will continue, housing and demographic trends suggest the sector will remain relatively strong over the next couple of years. While the question of whether and when conduits will surpass GSE originations remains to be seen, we anticipate that the percentage of multifamily product in CMBS will trend upward throughout next year. When 2015 rolls around we may even see the proportion of multifamily in CMBS approach or exceed levels last seen in the mid 2000s, when it represented, on average, 18%8 of the CMBS universe, with some recent deals in the conduit universe starting to trend closer to 20%. CRE Finance World Winter 2014 48 1 The GSE shelves included Fannie Mae ACES, GEMS, DUS, Mega DUS, Freddie Mac K Series and Ginnie Mae as reported by Bloomberg and Fannie Mae. 2 The percentage of multifamily loans in CMBS fixed rate conduit transactions as reported by Commercial Mortgage Alert (CMA). The exclusion of the $3 billion first mortgage loan of Peter Cooper Village and Stuyvesant would result in the adjusted 2007 new issuance market share of 23.1% GSEs and 76.9% CMBS, respectively. 3 The GSE shelves included Fannie Mae ACES, GEMS, DUS, Mega DUS, Freddie Mac K Series and Ginnie Mae as reported by Bloomberg and Fannie Mae. 4 The CMBS conduit transactions are inclusive of fixed rate multi-borrower transactions as reported by CMA. 5 The approximate 10-year national average vacancy rate was calculated using the annual vacancy rate for 2004 to 2012 and the average quarterly vacancy rate for 2013 as reported by REIS. 6 As reported by the Mortgage Bankers Association Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations third quarter 2013. 7 As of November 30, 2013, per Trepp, the total amount of loans in the CMBS Public Conduit Universe that are current or in a grace period that are expected to mature in 2014, 2015 and 2016 are approximately $31 billion, $76 billion and $99 billion, respectively. 8 The average percentage of multifamily loans in CMBS fixed rate conduit transactions for 2005, 2006 and 2007 as reported by CMA. FHFA Slowdown May Spur Multifamily Resurgence in Conduit CMBS


CRE Finance World, Winter 2014
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