“The amount of CMBS conduit loans should increase for ValueXpress and the industry for 2012, but not by leaps and bounds,” estimates Michael D. Sneden, Executive Vice President at ValueXpress. “I think the market as a whole, which generated about $30 billion in CMBS loans in 2011, will grow to about $50 billion in 2012.”
Sneden expects SBA lending to be active in 2012, particularly SBA 504. “I see a rush of SBA 504 refinances prior to the program’s scheduled end in September 2012. But I also wonder if the program will be extended or made permanent, a move that would make sense to me. On the other hand, the U.S. government does not seem capable of passing any legislation that makes sense, so I am not holding my breath,” said Sneden.
Sneden believes SBA 7(a) volume will be challenged in 2012. “The SBA 504 program is so much more competitive than SBA 7(a) that I see borrowers pressing lenders for 504 loans and walking away from SBA 7(a) proposals. “When refinancing was not allowed in 504, the SBA 7(a) program had a monopoly on SBA refinances,” notes Sneden. “In 2012, SBA 504 refinances will rule until September, in my opinion.”
Government-sponsored (GSE) multifamily programs (Fannie Mae, Freddie Mac and HUD) will continue to dominate the multifamily sector. CMBS conduit loans will capture multifamily loans that are ineligible for GSE execution, providing excellent debt capital flows to the multifamily sector overall.
To recap, in 2011, the commercial lending market for existing income-producing and owner-occupied real estate continued to improve, albeit very slowly. “In 2011, we completed our first CMBS conduit loan since the end of 2007,” commented Sneden. “We are now processing and closing about one CMBS conduit loan a month, a far cry from the 35-50 a year we originated in 2005-2007.”