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Capital Markets Overview

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

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  1. Capital Markets Overview Dennis Williams Managing Director NorthMarq Capital May 2011

  2. 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

  3. 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

  4. CMBS Market: Maturities Through 2017

  5. 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%

  6. A New World: Commercial Mortgage Underwriting 2007 to Present

  7. 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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