11.16.10: CMBS Deal Flow Picks Up According to Recent MBA Survey

Third-quarter loans for conduit CMBS grew 940% compared with the same quarter of 2009, according to the Mortgage Bankers Association’s Third-Quarter Origination Survey. The average third-quarter 2010 loan size was $30.5 million versus $18.2 million a year ago. The average conduit loan size in the second quarter of 2010 was $37.4 million; however, the loan origination volume index rose 43% to 16 loans in the third quarter from 11 in the second. The index is based on an average of 100, or the level of commercial real estate originations seen in 2001. Conduit CMBS loans remain at low levels.

Jamie Woodwell, analyst at the MBA, said the percentage increase doesn’t mean monumental strides in the CMBS market, but does indicate an attractive environment for commercial lenders. “What investors are looking at in terms of returns for CMBS, those yields are down considerably from three, six, or nine months ago,” Woodwell told HousingWire. “Deals that wouldn’t have made sense to do through CMBS six or nine months ago now do make sense.”

The total loan origination volume index stood at 70 for the quarter, up 14.8% from 61 in the second quarter and up 32% from 53 a year ago. This is the highest the index has been in seven quarters. Commercial bank originations decreased 49% year over year to an index of 32, as did originations from government-sponsored enterprises, down 16% to an index of 120. Loans originated through life insurance companies jumped 154% from a year ago, to an index of 176. The industrial sector saw the most origination growth in the third quarter, up 129% from a year ago to an index of 145, followed by the multi-family sector (up 37% to an index of 101), the office sector (up 39% to an index of 45) and the retail sector (up 19% to an index of 84). Both the hotel and healthcare sectors experienced a decline in the amount of originations in the third quarter; down 20% year over year to an index of 46 and down 46% to an index of 99, respectively.

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