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News release


Lenders Vie for a Bigger Piece of the Multifamily Pie

JLL points to more lenders snapping up multifamily financing market share in 2015

ATLANTA, Feb. 26, 2015 – Fannie Mae and Freddie Mac may still be on top, but lenders including life companies, conduits and banks are gaining ground. According to JLL’s Capital Markets, the agencies led the multifamily financing sector in 2014, notching nearly $55 billion in lending volumes, but as the economy improves and investor appetite for multifamily assets grows in 2015, competition – and lending volumes--will follow suit.

“Government-Sponsored Entities (GSEs) posted a slightly smaller market share in 2014, and this is a promising sign for the multifamily sector,” said Faron Thompson, leader of JLL’s multifamily debt financing platform. “Other lenders are becoming competitive but the agencies will maintain their edge with the introduction of new products including a small balance loan initiative, manufactured housing program, tax-exempt loans and value-add products.”

Game On

There is ample capital across the debt capital markets spectrum and lenders are employing all levels of the capital stack to strategically place dollars on multifamily deals. According to JLL’s latest research, the investment community remains enamored with the sector, leading lenders to battle it out to secure debt yields.

• Fannie Mae and Freddie Mac will remain competitive, particularly for opportunities with top sponsors and well-located, stabilized assets and are expected to match 2014’s transaction volume. Their average loan-to-value ratio is 70 percent and in some cases, 80 percent.

• Life companies often find themselves going head to head with GSEs to finance high-quality assets, backed by strong sponsorship in primary markets. These balance sheet lenders typically provide leverage at 65 percent or lower.

• CMBS lenders shine when it comes to higher-leveraged, fixed- and floating-rate loans. The conduits often loan up to at 80 percent, and will go higher when structured with mezzanine debt. Although the least active among current lenders, the conduits compete effectively on B and C assets and in secondary markets.

• Banks are competitive alongside CMBS for floating-rate, non-recourse structures and typically provide leverage up to 65 or 70 percent. They are known for providing some of the most competitive pricing on transitional loans for construction, redevelopment and renovation.

Job Growth Drives the Sector

According to the Department of Labor, more than 2.95 billion jobs were added to the economy in 2014, marking the best year for job growth since 1999 and fueling activity in the multifamily sector. Cities like Atlanta, San Francisco and Portland as well as Texas markets including Austin, Houston and Dallas boast some of the top prospects for multifamily development and renovation.

“If you’re following lenders’ paper trail, you’re looking at the markets that are adding jobs and population, which range east to west and include the Sunbelt cities,” said Tim Jordan, Managing Director at JLL. “Lenders are lined up for multifamily opportunities and looking for new development in good job markets with high barriers to entry and limited sites. Redevelopment of existing assets is occurring in mature markets where there are limited development sites available and good job fundamentals.”

Strong Sentiments

According to the 2015 Mortgage Banker Association’s (MBA’s) survey of the top commercial and multifamily mortgage origination firms, every major lender group is expected to increase originations. Leading the way is CMBS, with 89 percent of respondents anticipating a loan issuance increase of more than five percent. Banks rank second with 56 percent expecting an origination increase greater than five percent, followed by Freddie and Fannie (46 percent) and life companies (41 percent).

“The multifamily lending environment is very strong and boasts a significant amount of liquidity,” said Jamie Woodwell, MBA’s Vice President for Commercial Real Estate Research. “In 2015, we anticipate that lenders will be willing to take on a bit more risk as they are eager to issue loans and borrowers will increase their appetite to take out loans.”

Respondents of the Urban Land Institute’s “Emerging Trends in Real Estate 2015” hold the same sentiment: the majority note that lenders are ready to take on more risk in order to secure yield, stating “every lender is in every other lender’s business, making this environment as competitive as it has ever been.”

Bullish Borrowers

Capital is plentiful and multifamily fundamentals are firing on all cylinders, setting the stage for a robust lending environment in 2015.

“Sponsors have plenty of reason to stay bullish on the multifamily sector,” said Thompson. “In the current market, lenders are able to tailor the financing options to fit the business plans of the sponsor, leading to win-win executions.”

In 2014, JLL closed nearly $800 million in 50 transactions through its Freddie Mac Program Plus® lending business. Also, during the firm’s second year holding a partnership with Prudential and Fannie Mae’s DUS® lending program, JLL closed nearly $180 million in 9 loan transactions.

JLL Capital Markets is a full-service global provider of capital solutions for real estate investors and occupiers. The firm’s in-depth local market and global investor knowledge delivers the best-in-class solutions for clients — whether a sale, financing, repositioning, advisory or recapitalization execution. In 2014 alone, JLL Capital Markets completed $118 billion in investment sale and debt and equity transactions globally. The firm’s Capital Markets team comprises more than 1,700 specialists, operating all over the globe.

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About JLL
JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual fee revenue of $4.7 billion and gross revenue of $5.4 billion, JLL has more than 230 corporate offices, operates in 80 countries and has a global workforce of approximately 58,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3.4 billion square feet, or 316 million square meters, and completed $118 billion in sales, acquisitions and finance transactions in 2014. Its investment management business, LaSalle Investment Management, has $53.6 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit