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Health Care, CMBS Lead Surge in CRE Originations

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Quarterly commercial mortgage production has more than doubled over the past year and ascended to pre-crisis levels. Originations for commercial-backed securities and health-care financings led the improvement.

Second-quarter commercial real estate loan originations jumped 52 percent from the first quarter.

CRE fundings were up 107 percent from the same time last year.

The findings were oultined in the Mortgage Bankers Association’s Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations for the second-quarter 2011.

An analysis of MBA’s data and origination data reported for 2010 indicate that second-quarter commercial mortgage production was around $51.6 billion.

U.S. originations accelerated from approximately $34.0 billion in the first quarter. In the second-quarter 2010, volume came in at roughly $25.0 billion.

The last time production of commercial real estate loans was this high was in the second-quarter 2008 — just before financial markets seized up and the government took drastic measures to provide liquidity, boost bank capital and calm market fears.

“Greater stability in property fundamentals and prices, and an improving sales market, are providing greater clarity for borrowers and lenders alike,” MBA CRE executive Jamie Woodwell explained in the report.

By lender type, conduits saw the biggest quarter-over-quarter improvement: 208 percent. Compared to the second-quarter 2010, conduit production was 638 percent higher — also the best performance of any investor type.

Commercial banks pushed production up 42 percent from the first quarter and 150 percent from a year earlier.

CRE volume was up 37 percent at life insurance companies. Originations increased 87 percent from the second-quarter 2010.

At Fannie Mae and Freddie Mac, multifamily production climbed 20 percent from the first quarter and 58 percent from the same period last year.

Health-care financing rose 160 percent from the first quarter — the biggest rise of any property type. Health-care production was 141 percent higher than a year prior — also the biggest increase.

Hotel loan originations rose 88 percent and were up 125 percent from the second quarter of last year.

Retail property production climbed 72 percent from the prior three-month period. Retail volume climbed 116 percent from the same time last year.

A 46 percent gain was reported for multifamily property fundings. Compared to a year prior, apartment activity was 114 percent higher.

The origination of office property mortgages rose 31 percent and was up 54 percent from a year earlier.

Industrial originations edged up 6 percent from the prior quarter and were just over a third more than the second-quarter 2010.

“Property values and interest rates — coupled with job growth, consumer spending, household growth and other macro-economic trends that drive demand for commercial real estate — will be keys to how property owners seek and qualify for mortgage financing going forward,” Woodwell added.

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