\u201cPrudence Took a Vacation, and Then She Came Back\u201d is what moderator Shekar Narasimhan, managing partner of Beekman Advisors Inc., nicknamed the multi-family session \u201cThe Music Stopped: Who Has a Chair?\u201d at the Mortgage Bankers Association\u2019s Commercial Real Estate Finance\/Multi-family Housing Convention & Expo, and it was a fitting title. Generally, the speakers agreed that while the commercial and multi-family markets can expect some pain, especially given a number of unknowns to come, the credit crunch and single-family fallout have proven to be more of a much-needed wakeup call than anything else. That\u2019s not to say there won\u2019t be some interim pain. After about five years of 40 to 60 percent increases in investment activity, the bull market has ended, affirmed Real Capital Analytics president Robert White Jr. during an introductory economic briefing. Last year\u2019s record year for property sales was mostly due to portfolios and privatizations, with one-off sales actually declining even before the August crunch hit. Most property types suffered declines, although the apartment market saw an increase. Indeed, while cap rates overall saw an inflection point in September, he noted, the multi-family market experienced its correction back around the end of 2005, when the condominium converters disappeared. Multi-family pricing has remained fairly resilient compared to other property types, which have seen an overall increase of 100 to 150 basis points since the summer. (That increase would have been even greater, but Treasuries are much lower than they were this summer, reducing the gap.) Flex, retail and office pricing has been most affected. The good news, White noted, is that there is still plenty of equity capital in the market. He listed among interested players institutions (with large pension fund investment planned for this year, according to a Kingsley Associates report, although one investor later in the day reported hearing of current overallocations toward real estate due to the stock market\u2019s recent falloff), global investors (despite some continued skittishness about our economy), REITs (now quietly increasing their acquisition lines) and in-state private investors. Speakers that followed emphasized solid fundamentals and low delinquencies as positives. \u201cWe\u2019re going through a repricing period of risk,\u201d acknowledged Kieran Quinn, chairman of the MBA and of Column Financial Inc., but while delinquencies may even triple, the resulting number will still be low, he said. Furthermore, he added, \u201cyour CMBS lenders will be back. \u2026 The world will look a lot different in September. Hopefully in April, May or June it\u2019ll look a lot different.\u201d That said, job growth and the retail market remain wild cards, he warned. With Freddie Mac and Fannie Mae both announcing record 2007 multi-family rental volume yesterday (Freddie with $44.7 billion and Fannie with $60 billion), Freddie Mac senior vice president of multi-family sourcing Michael May also pointed to low delinquencies and noted that although financing and capital costs are up and credit risk has increased, \u201cI applaud the return to sound fundamentals, and I think that\u2019s where we are now.\u201d Three big issues to come: a flight to quality that will cause greater differentiation in cap rates between different types of markets (he offered New York City and Albuquerque as an example), an overabundance of shadow space to be dealt with and potential negative effects on properties surrounding the bad deals that will emerge from bets over the past two years on a strong economy. Fannie Mae senior vice president of multi-family Phillip Weber sees lessons from the single-family business, where people were putting zero down and getting negative amortization as well as being verified in the same way whether they had no assets and no income or invested 20 percent equity in their purchases. \u201cThat is not the fundamentals of lending,\u201d he affirmed. Speaker Sam Davis, senior managing director for Allstate Investments L.L.C., offered more negative insights. He expressed concern over deteriorating fundamentals and markets with an overabundance of new supply, predicting more defaults to come. And while the life insurance industry is generally said to be an active lender now, \u201cmy instinct is that\u2019s not going to happen,\u201d he declared. Influencing life company activity are reduced cash flows, weak product sales and management\u2019s concern about the economic situation, he said. That said, \u201cif the market doesn\u2019t come back, you\u2019ll see development of new vehicles,\u201d he added. For more coverage of this conference by our sister publication Multi-Housing News please go toMulti-Housing News or click on the stories below:SPECIAL REPORT: Mortgage Bankers Conference’s Opening Session Places Positive Spin on Credit Turmoil Commercial\/Multifamily Loan Originations Down in Q4, Says MBA Report<\/p>\n","protected":false},"excerpt":{"rendered":"
\u201cPrudence Took a Vacation, and Then She Came Back\u201d is what moderator Shekar Narasimhan, managing partner of Beekman Advisors Inc., nicknamed the multi-family session \u201cThe Music Stopped: Who Has a Chair?\u201d at the Mortgage Bankers Association\u2019s Commercial Real Estate Finance\/Multi-family Housing Convention & Expo, and it was a fitting title. Generally, the speakers agreed that…<\/p>\n","protected":false},"author":1314,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[37301],"tags":[],"class_list":["post-1003706726","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"acf":[],"yoast_head":"\n