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Seasonal Slump for CRE Loan Originations

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Mortgage Daily

                                                 May 15, 2012

Compared to the final three months of last year, quarterly commercial mortgage originations fell an estimated $6 billion — though the decline was seasonal. Health care properties, industrial properties and agency originations saw the biggest declines. Volume was better, however, than a year earlier — with banks, retail properties and health care properties leading the way.

First-quarter commercial real estate production was down 12 percent from the fourth-quarter 2011. Fundings have declined between the fourth and first quarters each year since 2007.

Compared to a year earlier, though, business jumped 36 percent.

The numbers were outlined in the Mortgage Bankers Association’s Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.

Using the $184.3 billion in full-year 2011 commercial mortgage production reported by MBA in February, an analysis of the indices reported today by the trade group indicates that CRE originations during the first-three months of 2012 were around $43.8 billion, down from roughly $49.9 billion in the final quarter of last year.

In the first-quarter 2011, production worked out to around a revised $32.1 billion.

Quarterly CRE loan production peaked in the second-quarter 2007 somewhere near $136.3 billion.

The average commercial mortgage was $13.3 million in the latest period, up from $11.6 billion three months earlier and $11.9 billion a year earlier.

Fannie Mae and Freddie Mac saw the biggest decline from the fourth quarter of any investor group: one-third. Multifamily volume at the two secondary lenders was 40 percent better, however, than the first-quarter 2011.

Conduits also fared poorly, dropping more than a quarter from the final three months of last year and losing 10 percent from the first-quarter of last year.

Commercial banks, however, pushed volume up 10 percent from the fourth quarter and 104 percent from the same period in the prior year.

Life insurance companies also stepped up CRE originations, gaining 2 percent over the prior quarter and 10 percent over the same period in the prior year.

By property type, the volume of health-care property loan production tumbled 53 percent from the fourth quarter — the worst performance of any category. Still, the sector saw a 118 percent increase over the same three months in 2011.

Also putting in a poor quarter-over-quarter performance were loans secured by industrial properties, which declined by half. Industrial property production was down nearly a third from a year earlier.

Multifamily production was down 22 percent to roughly $19.4 billion but was 45 percent better than the first quarter of last year, when originations totaled approximately $13.5 billion.

The volume of loans originated to finance hotels slipped 1 percent from the fourth quarter and 7 percent from the same period in 2011.

The best performance for any property type was retail, with loan fundings jumping 16 percent from the fourth quarter. However, retail property loans more than doubled compared to the first-quarter 2011.

Office properties saw fundings rise 4 percent from the previous period to around $6.8 billion. But office production slumped 9 percent on a year-over-year basis from approximately $7.5 billion.

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