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News release

Chicago

Jones Lang LaSalle 2009 Loan Production Outlook Survey

More than half of national lenders in Jones Lang LaSalle’s survey expect loan production to increase in 2009; refinancing gains greater prominence


CHICAGO, Feb. 11, 2009 — Fifty-three percent of nationwide lenders to the commercial real estate sector expect loan production to increase in 2009 versus 2008, according to findings from Jones Lang LaSalle’s annual 2009 Loan Production Outlook survey.  Those who expected increased lending all were private equity lenders and government agencies, noting an average expected rise in production up to 20 percent in 2009.  The surveyed banks and life companies all expected a volume decrease in 2009 ranging from 30 to 80 percent.
 
Jones Lang LaSalle’s survey — distributed to 50 nationwide lenders—including a mix of life insurance companies, commercial mortgage-backed securities dealers, private lenders, commercial banks and government agencies—was conducted at an opening event during this week’s Mortgage Bankers Association’s Commercial Real Estate Finance/Multifamily Housing Convention and Expo in San Diego, California.
 
Given the frozen state of the Commercial Mortgage-Backed Securities (CMBS) market throughout much of 2008 and continuing in 2009, and the lack of confidence in the market, many lenders have been hindered in their efforts to originate new loan allocations, leaving borrowers who seek funding to refinance approaching maturities or start new construction projects with few options.
 
As borrowers increasingly encounter maturing loans, refinancing would seem to be the order of the day for 2009.  This year, 80 percent of lenders responding to the survey predict that up to 40 percent of their company’s loan allocations will be used to refinance maturing loans within their existing portfolios. Another 13 percent expect refinancing of maturities to make up 80 to 100 percent of their portfolios.
 
“We weren’t surprised that the theme in today’s lending community seems to have gone from ‘we’ll be fine in 2009’, which was heard at last year’s MBA conference, to ‘it will be heaven in 2011’ which is an emerging theme this year. Lenders who we surveyed at the MBA indicated that there is capital available in the market today, though a large portion of those funds are already earmarked for existing maturities,” said Bart Steinfeld, Jones Lang LaSalle’s Managing Director of the real estate investment banking practice.  “As pending maturities build, there is a need for some type of securitized debt to re-emerge. The question remains whether the government will facilitate the rebirth of the CMBS market.  Without government help, the recovery will take longer and will be more painful.”
 
That future of securitized lending figured prominently in the survey, with 67 percent of nationwide lenders to the commercial real estate sector expecting some sort of securitized lending to return to the capital markets by 2011 or beyond.   A further breakdown of those surveyed indicates 22 percent predict securitized lending to return to the markets in 2010, while an additional 11 percent said securitized lending will never return to the capital markets. Lenders responding to this survey predict that when securitized lending appears on the horizon it will take a much different form with more traditional, conservative underwriting, fewer tranches, more disclosure and a structure where originators must hold the first loss piece. Respondents also commented that issuers retaining the b-piece may appear in the near future.
 
The Jones Lang LaSalle survey also indicated that, as borrowers seek to avoid default, 59 percent of all different lending types will provide forbearance from six to 12 months. A further 18 percent would extend between one and six months, and nearly a quarter (24 percent) would extend beyond a year. Those extensions will not come easily, as 79 percent of lenders will be requiring different terms, such as principal pay-downs, to restructure maturing loans. 
 
“The lending community doesn’t want to inherit assets through foreclosure, as most lenders we surveyed are willing to provide some form of forbearance, though the level varies case by case,” said David Hendrickson, Managing Director, real estate investment banking, Jones Lang LaSalle.
 
Jones Lang LaSalle Capital Markets is composed of a broad range of real estate investment debt and equity specialists, and corporate finance experts, working on all property types and in all the major national markets on behalf of major institutional and local investors and developers, as well as corporations.  The firm's Capital Markets professionals are highly skilled at pinpointing and tailoring the right capital solutions for each of these client's needs.  The Investment Sales teams assist investors in developing and executing asset recapitalization strategies for office, industrial, retail, multifamily, healthcare and seniors housing product.  The firm’s Real Estate Investment Banking experts raise debt and joint venture equity for investors and developers, and provide secondary loan sale advisory services.  The Corporate Capital Markets professionals help corporations develop and execute strategies that bridge their occupancy, capital deployment and financial reporting objectives for their facility portfolios.  Collectively, the firm's Capital Markets team handled $82 billion in annual transaction volume in 2007.
 
About Jones Lang LaSalle
 
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2008 global revenue of $2.7 billion, Jones Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate offices.  The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.3 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with more than $46 billion of assets under management. For further information, please visit our Web site, www.joneslanglasalle.com.