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Capital Markets Overview. Dennis Williams Managing Director NorthMarq Capital May 2011. Key Themes of 2011. Conduit collateral performance still declining. Total delinquency rate 9.4% as of Q-1 2011.

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capital markets overview

Capital Markets Overview

Dennis Williams

Managing Director

NorthMarq Capital

May 2011

key themes of 2011
Key Themes of 2011
  • Conduit collateral performance still declining.
    • Total delinquency rate 9.4% as of Q-1 2011
  • New underwriting standards and projected loan volumes are still not sufficient to rollover debt maturities.
  • CRE fundamentals are slowly improving, but weak across most major property segments and markets.
  • 2011 ushered in the rebirth of the life insurance companies , banks and the return of new CMBS issuance.
    • Underwriting more aggressive and “strike zone” widening
banks hold largest share of cre loans
Banks Hold Largest Share of CRE Loans
  • 44% of commercial real estate loans are held on bank balance sheets.
  • CMBS accounts for 21% of the $3.4 trillion commercial real estate market
commercial mortgage delinquency rates by lender type
Commercial Mortgage Delinquency Rates by Lender Type
  • Sources: Fannie Mae, Freddie Mac, Morgan Stanley Research
  • CMBS: 9.4%; Life Companies: 0.5% Fannie Mae: 0.62%; Freddie Mac: 0.12%; Banks and Thrifts: 3.6%
looking ahead
Looking Ahead:
  • Agencies Remain Reliable:
    • Rates and terms remain attractive, but underwriting guidelines penalize properties showing any weakness
  • Rebirth of Life Companies:
    • In 2009, 60% of Life Co’s said they were “in the market”
    • In 2011, 95% are “in business” with allocation goals indicating at least $50 billion in originations
  • CMBS Returns:
    • Rates in the high 4’s to mid 5’s, up to 75% LTV, all major property types
  • Underwriting:
    • Rents to lesser of actual or market
    • Lender-imposed minimum vacancy by property type/market
    • Special attention to rollover (reserves or cash flow sweeps)
    • LTV: 65-75% on real cap rate
    • DSC: 1.25x–1.40x
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