Private Equity Lenders, Agencies Expect Their Lending in ’09 to Increase Up to 20%

By Anuradha Kher, Online News EditorChicago–Fifty-three percent of nationwide lenders to the commercial real estate sector expect loan production to increase in 2009 versus 2008, according to findings from Jones Lang LaSalle’s annual 2009 Loan Production Outlook survey. Private equity lenders and government agencies expected increased lending, with an average rise in production up to 20 percent in 2009 while the surveyed banks and life companies all expected a volume decrease of about 30 to 80 percent in 2009.The Jones Lang LaSalle survey was distributed to 50 lenders, including a mix of life insurance companies, commercial mortgage-backed securities (CMBS) dealers, private lenders, commercial banks and government agencies.Given the frozen state of the CMBS market throughout much of 2008 and continuing in 2009, and the lack of confidence in the market, many lenders have been hindered in their efforts to originate new loan allocations, leaving borrowers who seek funding to refinance approaching maturities or start new construction projects with few options. “The outlook for multifamily loans is far better than that for other property types,” David Hendrickson, managing director of real estate investment banking at Jones Lang LaSalle, tells MHN. “Loans are still available for multifamily properties—thanks to agency financing.” As borrowers increasingly encounter maturing loans, refinancing would seem to be the order of the day for 2009. This year, 80 percent of lenders responding to the survey predict that up to 40 percent of their company’s loan allocations will be used to refinance maturing loans within their existing portfolios. Another 13 percent expect refinancing of maturities to make up 80 to 100 percent of their portfolios. Bart Steinfeld, Jones Lang LaSalle’s managing director of the real estate investment banking practice, says, “As pending maturities build, there is a need for some type of securitized debt to re-emerge. The question remains whether the government will facilitate the rebirth of the CMBS market. Without government help, the recovery will take longer and will be more painful.”According to Hendrickson, the stimulus package could help, assuming it creates jobs. “The stimulus package and tax breaks by themselves will not help the commercial real estate market. But TALF and TARP will prop up the lending community (because of the lowered interest rates) and hence the CRE market. Assuming this restarts the CMBS market, there will be a big impact on the market in general.”That future of securitized lending figured prominently in the survey, with 67 percent of nationwide lenders to the commercial real estate sector expecting some sort of securitized lending to return to the capital markets by 2011 or beyond. “The lending community doesn’t want to inherit assets through foreclosure, as most lenders we surveyed are willing to provide some form of forbearance, though the level varies case by case,” says Hendrickson.But according to their charter, the agencies will have to reduce their portfolios beginning 2010, which will cause a demand-supply imbalance, explains Hendrickson. “In my mind, the wild card is the government. They could change their policy with regards to the agencies because they are working well and that would change the scenario for the multifamily market,” adds Hendrickson.