Multifamily Debt Market

Transcription

1 H U N T M O R T G A G E G R O U P Multifamily Debt Market Hayley Suminski Originator, Boston Office

2 Multifamily Debt Market Asset Types 1. Conventional & Coop 2. Manufactured Housing 3. Seniors Housing 4. Student Housing 2

3 * Forecast Sources: Marcus & Millichap Research Services, MPF Research This document was presented during the 2016 NCREIF Summer Conference. Apartment Vacancy vs. Construction 300 Completions Vacancy Rate 10% Completions (000s of Units) % 6% 4% 2% Average Vacancy Rate * 0%

4 National Apartment Rank by Metro 2016 Completions* Top 10 Metros 2016 Completions* Completions as % Inv. Bottom 10 Metros 2016 Completions* Completions as % Inv. New York 30, % Dallas-Fort Worth 25, % Houston 24, % Seattle-Tacoma 15, % Washington, D.C. 13, % Denver 12, % Los Angeles 11, % Austin 11, % Atlanta 9, % Phoenix 9, % U.S. Total 285, % Cleveland % Sacramento 1, % St. Louis 1, % Las Vegas 1, % Jacksonville 2, % Detroit 2, % Cincinnati 2, % Oakland 2, % West Palm Beach 2, % Indianapolis 3, % U.S. Total 285, % * Forecast Sources: Marcus & Millichap Research Services, MPF Research

5 Annual Renter and Owner Household Formations

6 U.S. Apartment Price and Cap Rate Trends $150 Average Price Cap Rates 8% Average Price per Unit (000s) $125 $ $75 $50 +32% * Preliminary estimate through 1Q Includes sales $1 million and greater Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics * 7% 6% 5% 4% Average Cap Rate

7 U.S. Apartment Investment Transaction Growth Pace Moderating in 2016 $1M-$10M $10M-$20M $20M+ 16 Total Transactions (000s) * * Preliminary estimate for trailing 12-months through 1Q Includes sales $1 million and greater Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics

8 Apartment Investors Pursue Yield Capital Allocations Moving Beyond the Core $16 Secondary/Tertiary Market Dollar Volume- $15M+ Percent in Secondary/Tertiary Markets* 70% Dollar Volume (Billions) $12 $8 $4 $ * Trailing 12-month average Includes sales $15 million and greater Sources: Marcus & Millichap Research Services, Real Capital Analytics, CoStar Group, Inc % 50% 40% 30% Percent of Dollar Volume

9 Apartment Cap Rate Spreads Compress as Investors Pursue Yields Beyond Core 9% Preferred Primary Secondary Tertiary 8% Average Cap Rate 7% 6% 5% 120 bps 370 bps 210 bps 4% * Preliminary estimate through 1Q Includes sales $1 million and greater Preferred Markets Include: NY, DC, BOS, SD, LA, OC, SJ, SF, SEA Sources: Marcus & Millichap Research Services, Real Capital Analytics, CoStar Group, Inc *

10 U.S. Apartment Cap Rate Trends Average Cap Rates vs. 10-Year Treasury Apartment Cap Rate 10-Year Treasury Rate Average Rate 10% 8% 6% 4% 2% 0% 380 bps 390 bps 430 bps 10-Yr Treasury Long-Term Avg bps 100 bps Cap Rate Long-Term Avg * Through July Includes sales $1 million and greater Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics, Federal Reserve 450 bps 391 bps *

11 Multifamily Debt Outstanding Totals $1.07 Trillion 11

12 Multifamily Debt Allocation MF Debt Outstanding 6% 5% 9% 44% 33% Agency, GSE Banks State & Local Gov't Life Insurance Co's CMBS, CDO, ABS 12

13 Multifamily Debt Allocation 13

14 Multifamily debt allocation by quarter 14

15 Record Origination Volume 15

16 Agency Financing Overview Three Multifamily sources Fannie Mae DUS Freddie Mac FHA/GNMA 16

17 Fannie Mae DUS 2015 $42.3B Conventional, Affordable, Small Balance $30B FHFA capped business - remainder uncapped Currently on track to meet/exceed 2015 volume Loans financed via Single Asset MBS sold to 3rd party investors with payments guaranteed by Fannie Mae 5-30 Fixed Loan Terms. Yield Maintenance Prepay. Graduated prepay on certain structures available. Floating structures available 17

18 Freddie Mac 2015 $47.3B Conventional, Affordable, Small Balance. *Leading multifamily lender for 1st time $30B FHFA capped business - remainder uncapped Currently on track to meet/exceed 2015 volume Loans financed via pooled securitization of loans purchased by Freddie Mac CMBS-style securitization. Guaranteed and Unguaranteed tranches sold to 3rd party investors 5-10 Fixed Loan Terms. Defeasance Prepay. Graduated Prepay available in Small Balance. Floating structures available 18

19 FHA Ginnie Mae 2015 $13.5B Currently on track to meet/exceed 2015 volume Loans financed via Single Asset MBS sold to 3rd party investors with payments guaranteed by Ginnie Mae year fully amortizing terms. Graduated prepay 19

20 Success and Reasons for Success 12 MONTH 10 YEAR UST YIELD GRAPH 20

21 Success and Reasons for Success 10 YEAR UST YIELD GRAPH: Back 10 years 21

22 Success and Reasons for Success 3rd Party MBS Investor Interest Strong Since 2008 significant increase in 3rd party MBS interest Wall Street Regional Broker Dealers Banks Insurance Companies Funds Strong demand - spreads low and competitive Number one driver Agency CMBS market Limited/narrower investor base would widen spreads Guaranteed yield at 65-75bps pickup to UST s. Safe investment Affordable Housing and Conventional loans in specific markets satisfy many bank CRA requirements Despite tremendous increase in supply, market has weathered the storm and able to absorb volumes with very few hiccups Previously a $25B-$40B market now $100B+ annual market 22

23 Success and Reasons for Success Historically Low Interest Rates Combined with Agency s servicing and guarantee fees, average spreads (12 months) depending on credit and structure have fallen bps over Treasuries Trailing 12 month 10 year UST yield average = 2.08% Average FNMA/Freddie Mac10 year loan rates 3.75% % Average FHA rates 3.00% % (before MIP requirements) Compare to height of the market in where average rates were 5.50% % year UST average of 4.70% average spread bps over UST s Which market do you prefer? 4.75% 10 yr UST, spreads 75bps 150bps 2.00% 10 yr UST, spreads 175bps 250bps 23

24 Success and Reasons for Success Agency Lending Caps Fannie Mae and Freddie Mac 2016 volume cap recently increased to $35B, from $31B FHFA s commitment to GSE multifamily business Cap exclusions include: Affordable Housing Manufactured Housing Conventional Properties 5-50 units Loans in standard to very high cost markets with tenants at 60%-100% of area median income depending on the market FHFA quarterly reviews of GSE market share to determine further increases or changes to scorecard exclusions No Volume Cap for FHA/Ginnie Mae 24

25 Recap - Where We Stand Today Agency CMBS market share doubled in last four years $100B+ Market Bigger than CMBS No sign of a slow down 3rd party MBS interest strong new participants entering the market Market s ability to absorb volume Spreads remain competitive Low Treasury yields + competitive spreads = historically low attractive note rates 25

26 H U N T M O R T G A G E G R O U P