New numbers from the Mortgage Bankers Association (MBA) tell a tale of heightened loan origination from commercial banks and life insurance companies to commercial property in 2012. Will 2013 mark the return of pre-recession levels of capital to commercial property markets?
Commercial/Multifamily Mortgage Bankers Originations Index published by the MBA shows commercial banks produced their highest loan origination volumes since second quarter 2008. Life insurance companies as a class “have origination volumes greater than before the recession while other lender types are still at below-recession levels” according to a National Real Estate Investor report.
[Many] market observers believe that both banks and life insurers will have closed 2012 with year-over-year increases in commercial/multifamily originations. A December report from Marcus & Millichap Real Estate Investment Services notes that portfolio lenders have been doing more commercial real estate transactions in 2012 than in 2011. Banks, including national, international and regional companies, accounted for roughly 25.5 percent of all commercial real estate loans closed last year, according to research by Marcus & Millichap and Real Capital Analytics, while life insurers were responsible for 18.1 percent of all loans.
When NREI spoke to Dave Clark, senior vice president of real estate with Northwestern Mutual last January, the Milwaukee, Wis.–based life insurer had a goal of increasing its commercial real estate originations by $500 million, to a total of $5 billion in 2012. The firm managed to close 2012 with nearly $5 billion in new transactions, Clark says.
“Our mortgage loan account has done wonderfully well through the downturn, with essentially no losses,” he says. “People are very happy with that performance. Combine [that] with interest rates that are low enough to be attractive to borrowers but are still higher than what you could get on corporate bonds, and I would speculate that life companies will continue to seek relative value in mortgages. This year, our origination goal would probably be 10 percent higher” than in 2012.
(Photo credit: Thomas Hawk)