Multifamily Originations Projected to Increase
- Feb 23, 2012
Boston—According to speakers at the latest Mortgage Bankers Association (MBA) Commercial Real Estate Finance/Multifamily Housing Convention & Expo 2012 in Atlanta, there will be an increase in multifamily originations in the coming year. MHN recently spoke with Dan Palmier, CEO of UC Funding LLC, a Boston-based real estate financial firm, about his thoughts on this and his projections for the future of multifamily.
MHN: At the recent MBA conference, they projected that there’d be an increase in multifamily originations. Do you agree?
Palmier: Absolutely, 100 percent. We’re definitely seeing a lot more deal flow. We’re seeing a lot more deal flow in Atlanta. We probably have 10 multifamily transactions—and a retail deal—in our pipeline in Atlanta, and we’ve done five or six deals in the last four or five months in Atlanta.
MHN: Why do you think Atlanta is so hot right now?
Palmier: Atlanta and some other markets are absolutely experiencing a recovery, and I think there’s job growth. Whether it’s reported in the papers or through economic forecasts—or not—I can tell you there’s absolutely a recovery going on in Atlanta and in other markets. The Texas markets—Dallas, Houston, San Antonio and Austin—there is a good economy down there, and we’re in Chicago and Phoenix and up and down the Eastern seaboard, so we’re definitely seeing a capitulation in the market place. We’re feeling the benefits.
MHN: Why do you think these areas have growth?
Palmier: The fundamental foundation of our business is job growth and recovering economy. We’re seeing a confidence in some lenders. We’re seeing entrepreneurs that are venturing forth, and their confidence in the economy will bode well for our pipeline. The entrepreneurs that we’re dealing with are just seeing great value from an appraised value standpoint, [and] we’re seeing some positive metrics in rental growth, so all that bodes well for the multifamily side. Then you’ve got a lot of lenders on the permanent loan side. You’ve got a low treasury rate, low cost of capital and the start of a recovering economy, and those are very positive things for our industry.
MHN: What do you predict for multifamily?
Palmier: Increase of rental rate. I think we’ll start seeing more development [from the] ground up. I think demand and supply in a lot of markets are definitely in balance, and I think there’s definitely a growing demand for multifamily housing. We’re seeing demand for development. I think culturally there’s a movement across the country where home ownership is not as glamorous anymore. You can analyze rent vs. buy and come out on the rental side in a lot of markets, so that bodes well for multifamily housing as well.
MHN: Do you think this will continue?
Palmier: In America, having your own house is part of the dream of being an American, but it’s not like it used to be. The younger, college-educated consumers are very mobile, and they’re not really tied to a house. The barriers of buying a house are real, and what the banking industry requires on a down payment is certainly an impediment. I think for the foreseeable future that will bode well for multifamily housing. I don’t see the loosening up of credit standards by banks happening any time soon.
MHN: Is there anything you’d like to add?
Palmier: We’ve been around for about a year and a half; we did $250 million in 2011, which is our first full year of operation. We’re very bullish on 2012, and our goal is to do between $750 million and a billion. That’s a lot of products, and we love the market, we’re raising capital, and we’re really viewed as a go-to lender. Our average speed of execution, which is one of our competitive advantages, is less than 21 days from term sheet to closing. I don’t know if anyone in our industry can match our reliability and quickness to close. We’ve got plenty of capital. We’re also hiring all throughout the ranks—underwriters, asset managers, servicers and loan originators.
MHN: It sounds like things are looking up.
Palmier: For sure, for sure. We’re very enthusiastic right now, and I think we’ll have a lot to talk about in the years going forth.