Current stats on commercial real estate deals, metros to watch in the year year, lending trends and risk tolerance as we head into 2014. Presented by Dianne Crocker, Principal Analyst, EDR Insight EBA RMC monthly call, January 2014

1. EBA Monthly RMC Call
2014 Forecast:
Entering the 2nd Half Of Market Recovery
By:
Dianne Crocker, Principal Analyst
EDR Insight
January 8, 2014
© 2014 Environmental Data Resources, Inc.

2. Market in Transition
2008 2009 2010
2011
2012
2013
2014
Survival Mode
True start of
market rehabilitation
Year of
refocusing
and repositioning

3. View of Market: 50,000 Feet
Y-on-Y Growth, 2013
(preliminary)
CRE Lending
-SBA Lending
+14%
+ 9%
Property transactions:
-Large
+27%
-Small (<$5M)
+18%
-Portfolios
+20%
CMBS Issuance
+46%
Phase I ESAs
+14%
• All debt spigots are open.
• Growing investor confidence.
• More diversity in lenders,
investors.
• Activity across broader spectrum
of properties.
• Improving property
fundamentals.

4. Large Commercial Real Estate Deals Up
• By 3Q13, deal flow up 27%
in 3Q YTD
• Nov up 15% YonY
• Poised for healthy finish to
the year

5. Headline Makers on Major Property Deals

6. Recent Trend:
• The universe of buyers is growing rapidly
• The number of active buyers over the past twelve months
grew by 3,300 participants with the private sector seeing the
greatest growth.
• A number of new investors from Asia and Europe are also
growing in influence.

7. Small Cap Transactions
• The velocity of small-cap sales is more than
keeping pace with the larger CRE investment
market.
• Up 17% YTD (3Q13)
• Transactions continue to grow at a faster clip in
bigger cities than smaller ones.

8. Property Types in Favor
• Multifamily is still the “belle of the ball” (up 31%
Y-on-Y)
• Retail: sales of strip centers are up 30%
• Office/industrial getting more interest
• Warehouse activity, especially in port cities

9. Geographic Spotlight

10. Good News on the CMBS Front
• 2012:
• Post-recession high
of $48B
• 2013:
• Prelim #s: $80B in
2013
• Up 65% YonY
• 2014 Forecast:
• Same or better

11. Banks’ Sell-off of Nonperforming
Assets

12. Commercial Property Lending
Volume
• Lenders have returned to originating commercial real
estate loans as values and credit quality improve and
demand increases
• Commercial and multifamily real estate borrowing and
lending continued at a moderate clip in the third quarter.
• Origination volumes:
• 29% higher than in Q3 2012
• Flat compared to 2Q13
• Up 14% year to date
Source: MBA’s Quarterly Index of Commercial/Multifamily Mortgage Bankers Originations.

13. LENDING: A Positive Take
“More banks were lending on incomeproducing commercial real estate
properties in more places in the 3rd
quarter. The number of lenders who plan
to increase property loans in next 12
months far outnumber those who plan to
lower them.”
~ Sam Chandan, president and chief economist at
Chandan Economics

14. Lending Leaders: CRE
Page 14

15. SBA Lending: A Bright Spot
• Supported more than $29B in loans in FY13—its third-highest
year ever.
• More than 54,000 loans backed through its 7(a) and 504
programs
• The number of 7(a) loan increased to 46,399 in 2013, 4.6%
over the number of loans in FY 2012.
• The 504 loans produced more than 7,700 loans in FY 2013, a
slight decrease from FY 2012.
• 7(a) lending is picking up steam after being halted by the
government shutdown. (down 7% in 4thQ)

16. Bottom Line on Lending
• The comeback of commercial real estate lending is
gaining momentum, especially credits backed by
apartments and leased properties.
• CRE lending was a scourge for scores of community
banks during the financial crisis, but more banks are
warming up to it in their quest for higher returns.
• However, CRE lending volumes remain well below the
highs of six years ago.

17. APPROACHES TO
ENVIRONMENTAL RISK
MANAGEMENT
© 2014 Environmental Data Resources, Inc.

18. Banks and Risk Management
• 94% of institution’s boards now devote more time to risk
management oversight than five years ago
• 80% percent of chief risk officers report directly to either the
board or the CEO
Source: Deloitte lender study

19. Attitudes Toward Risk
• Phase I ESAs more likely to go to a Phase II than in past years
• 16% vs. 6% 2 years ago
• More attention on environmental policies by financial institutions.
• Investors, lenders as risk conscious as ever.

20. Upshot for 2014
• Real estate should put in strong performance in 2014
• U.S. economy shows signs of strength
• CMBS lenders, insurance lenders and bank lenders will all be
active
• Expect to see growth from commercial mortgage funds with
3rd party capital
• 2014 marks the 2nd of the market’s recovery
• Modest growth

21. Dianne P. Crocker
Principal Analyst, EDR Insight
Research and Analytics:
www.edrnet.com/EDRInsight
Twitter:
@dpcrocker
Email:
dcrocker@edrnet.com