Slide Presentation

Report
Capital Markets Overview
Dennis Williams
Managing Director
NorthMarq Capital
April 2012
Key Themes of 2012
• CMBS Delinquency has leveled off but could spike again. Originations
have picked up pace again but remain vulnerable to market shocks.
– Total delinquency rate currently 9.5% as of April 2012
– Defaults likely to increase when aggressive originations from 2005-07 mature.
• New underwriting standards and projected loan volumes still not
sufficient to rollover debt maturities (but getting closer).
• 2012 has seen much more activity from life insurance companies,
commercial banks and value add lenders.
–
Underwriting more aggressive and “strike zone” widening
Commercial/Multi-Family Less Than ¼ of All Mortgage Debt
Mortgage Debt Outstanding ($ Trillion)
Farm
$0.13
1%
Commercial
$2.22
17%
Multi-Family
$0.84
6%
Home
$10.29
76%
Source: Federal Reserve Flow of Funds Report Q4’11
GSE’s Nearly Half of Multi-Family Market & Growing
Multi-Family Outstanding ($Billion)
Fed, State &
Local Gov't
$83.7
CMBS/ABS
10%
$91.1
11%
Other
$17.7
2%
GSE's
$341.8
41%
Banks/S&Ls
$251.2
30%
Source: Federal Reserve Flow of Funds Report Q4’11
Life
Cos/Pensions
$55.3
6%
Banks Hold a Majority of CRE Loans
Commercial Outstanding ($ Billion)
Fed, State &
Local Gov't
$81.5
4%
Other
$30.7
1%
CMBS/ABS
$498.1
22%
Source: Federal Reserve Flow of Funds Report Q4’11
Finance
Cos/REITS
$84.8
4%
Life
Cos/Pensions
$280.4
13%
Banks/S&Ls
$1,253.4
56%
CMBS Market: Maturities Through 2017
Commercial Mortgage Delinquency Rates by Lender Type
Year End 2011
Range Since 1990
Latest
Delinquency Rate
12%
8%
4%
0%
CMBS
Life Companies
Fannie Mae
Freddie Mac
Source: Mortgage Banking Association
CMBS: 8.56%; Life Companies: 0.17% Fannie Mae: 0.59%; Freddie Mac: 0.22%; Banks and Thrifts: 3.55%
Bank & Thrifts
A New World:
Commercial Mortgage Underwriting 2007 to Present
2007 Underwriting
2009 Underwriting
New Underwriting
5% NOI Decline
$5,000,000
$5,000,000
$4,750,000
$100,000,000
$62,500,000
$79,200,000
5.00%
8.00%
6.00%
Loan to Value
80%
55%
70%
Loan Amount
$80,000,000
$34,375,000
$55,400,000
Equity
$20,000,000
$28,125,000
$23,800,000
Interest Rate
5.75%
8.00%
4.25%
Amortization
I/O
30
30
Debt Service
$4,638,940
$3,026,779
$3,270,000
1.08x
1.65x
1.45x
NOI
Purchase Price
Lender Cap Rate
Debt Service Coverage
Looking Ahead:
1. Agencies Remain Reliable:
– Rates and terms remain
attractive, and underwriting
guidelines less conservative.
3. CMBS Doing Some Business:
– Rates have dropped from the
high 5’s to high 4’s, up to
75% LTV, all property types.
2. Rebirth of Life Companies
and Banks:
– In 2012 most life companies
in the market and originating
at or near 2007 levels.
– Most large banks remain
active, while regional banks
starting to lend again.
4. Underwriting:
– Special attention to rollover
(reserves/cash flow sweeps).
– Single tenant problematic.
– LTV: 50-70% on real cap rate
– DSC: 1.30x–1.50x.

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