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MBA: Q1 Databook Shows Real Estate Feeling Effects of Cycle

MBA: Q1 Databook Shows Real Estate Feeling Effects of Cycle

The Mortgage Bankers Association’s (MBA) Quarterly Databook showed that recent economic headwinds—slowing GDP growth, a still weak jobs market and other factors—have raised concerns for commercial real estate. Although, so far, most sectors are continuing to slowly recover.

For all property types, the MBA’s originations index in the first quarter was 85. That was a drop from the mark of 114 in the fourth quarter of 2010, but was the best first quarter figure since 2008. It was also an 89 percent increase over the first quarter of 2010. (A score of 100 on the originations index equates to the volume of an average quarter in 2001.) MBA attributed the drop to fact that originations tend to be cyclical—with the fourth quarters generally experiencing higher volumes than quarters earlier in the year.

The picture was similar for retail properties. The MBA’s origination index on retail fell to 96 in the quarter—down from a reading of 184 in the fourth quarter. It was the highest reading for a first quarter since the index was at 181 in the first quarter of 2008. It did mark a return to a sub-100 figure for the retail originations index after it had exceeded that market for the first time in more than two years in the fourth quarter of 2010.

When compared to the first quarter of 2010, the increase, this included a 465 percent increase in loans for hotel properties, a 194 percent increase in loans for industrial properties, a 104 percent increase in loans for multifamily properties, a 92 percent increase in loans for office properties, a 91 percent increase in loans for health care properties, and a 13 percent increase in loans for retail properties. The resulting origination volume indexes by property type showed industrial at the top (168), followed by hotels (110), multifamily (99), retail (96), office (68) and health care (50).

According to the report: “Like property sales volumes, commercial and multifamily mortgage originations followed the usual seasonal pattern of declining between the fourth quarter and first quarter. First quarter 2011 originations were 25 percent lower than during the fourth quarter of 2010 and 89 percent higher than during the same period last year. Every major investor group saw an increase in activity compared to last year’s first quarter. Life companies made $7.8 billion of mortgage commitments during the first quarter, the highest first quarter level since 2008 and 60 percent more than during last year’s first quarter. CMBS securitizers issued $11.6 billion of new bonds, the highest first quarter level since 2007. No new CMBS were issued during the first quarters of either 2009 or 2010.

The level of commercial/multifamily mortgage debt outstanding decreased by 0.1 percent in the first quarter to $2.337 trillion, down $3 billion from the fourth quarter.

Commercial banks continue to hold the largest share of outstanding mortgages, at $794 billion, or 33 percent of the total. CMBS, CDO and other ABS issues are the second largest at $626 billion, or 26 percent of the total.

Among investor types, first quarter 2011 originations for conduits for CMBS increased 391 percent compared to last year’s first quarter. There was also a 126 percent increase in loans for life insurance companies, a 73 percent increase for loans for commercial bank portfolios, and a 59 percent increase for Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie.

As for loan sizes, the average retail deal came in at $15.1 million, down from $18.9 million in the fourth quarter of 2010.

In addition to originations data and economic commentary, the Databook also includes charts on commercial real estate fundamentals, commentary on commercial real estate from the most recent Federal Reserve Board Beige Book and details on the latest delinquency metrics for different commercial real estate lender sectors.

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