10.7.11: Uptick Seen in CMBS Conduit Multifamily Originations

Earlier this month Reis reported that U.S. apartment vacancies fell to a five-year low in the third quarter of 2011 to 5.6%, enabling landlords to increase rents even though the overall economic picture is less than rosy.  The 5.6% vacancy rate is the lowest since the third quarter of 2006 and compares with 5.9% in second-quarter 2011 and 7.1% a year ago.  The average monthly effective rent rose to $1,004 from $997 in the second quarter and $981 a year ago.  Mounting foreclosures, tighter credit for homebuyers and young people moving out on their own have increased demand for apartments after the vacancy rate reached a three-decade high of 8% at the end of 2009.

“The impact of increasing occupancy and rents has been an improvement in operating performance for multifamily properties,” said Jim Brett, chief underwriter at ValueXpress.  “Better market and property occupancy allow lower vacancy assumptions in CMBS conduit multifamily underwriting, providing more underwritten income that flows to larger loan proceeds, which is all borrowers care about right now.”

“We at ValueXpress have a new relationship with a mezzanine lender to plug the gap should first mortgage proceeds fall short of borrower needs,” Brett said.  “The program starts at $1 million and can entertain mezzanine loans upwards of $20 million.”

“Bottom line, we are placing more multifamily loans under application with property operating fundamentals improving,” said Michael D. Sneden, Executive Vice President of ValueXpress.  “Most of the properties do not qualify for Freddie Mac or Fannie Mae execution for one reason or another, but still need a loan.”

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This entry was posted in CMBS Conduit Loans, Commercial Mortgage-Backed Securities, Michael D. Sneden, News & Recent Closings, Valuexpress and tagged , . Bookmark the permalink.

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