(To read more on the debt and equity markets and the multifamily market, click here.)
WASHINGTON, DC-Real estate finance continues to set record trends, to no one's surprise. The latest data point? Last year, some $345 billion in commercial/multifamily loans closed--a 49.9% increase over 2004--according to the Mortgage Bankers Association's report which surveyed 125 top commercial/multifamily finance firms.
Multifamily comprised the largest share of originations among property type, accounting for accounted for $92.1 billion (26.7%) of closed loan activity in 2005. CMBS conduits represented the leading investor type, reporting total originations of $206 billion (44.8% of total) during the year.
At $19.3 billion in originations, the Washington, DC-area ranked seventh among the top 10 most active cities, followed by Orange, CA, Boston and Houston. The leading cities were New York City, which reported originations of $106.5 billion and having an average size of $22.6 million. Chicago ranked second with $33.2 billion in originations carrying an average loan size of $10.4 million. Los Angeles ($32.6 billion in total originations), Dallas ($24.6 billion), Atlanta ($22.2 billion) and San Francisco ($20.5 billion).
Developers active in the area cite strong demographics and a steady flow of capital as drivers. "Employment growth in the DC metropolitan area is expected to continue to be dynamic and, as such, the outlook for apartments remains extraordinary, says Tom Bozzuto, CEO of the Bozzuto Group, which just completed a $98-million acquisition of a 1,188-unit multifamily portfolio through a joint venture with Fannie Mae. "I also believe that institutional capital will continue to be as plentiful over the next few years as it is today and that we'll see continued demand for quality apartment communities."
John Chappelear, senior vice president of Condo Operations for KSI Services Inc., also points to employment as a key growth factor in the Washington-area's multifamily market. "There were 80,000 new jobs created in the Washington area market, which means there will be a demand for 40,000 new housing units." KSI has several ongoing multifamily projects in various stages of development including Midtown Reston Town Center, Midtown Lofts, Midtown Bethesda North, the Metropolitan at Reston Town Center and Midtown Alexandria Station.
This week the company announced that the final floor of its 20-story Midtown Bethesda North condominium project has been poured. Chappelear says that project, which is 65% sold, will be completed by 2007.
On the investor side, MBA reports that Washington, DC-based government agencies accounted for 6.8% of investment last year; Fannie Mae purchased $17.4 billion (3.8% of the total), Freddie Mac, $9.9 billion (2.2%) and FHA/Ginnie Mae, $3.9 billion (0.8%). Following CMBS conduits, the leading investors were commercial banks for which firms originated $90.1 billion (19.6%) followed by life insurance companies at $81.4 billion (17.7%), $10.8 billion for REITs (2.4%), and pension funds and specialty finance companies which tallied $6.3 billion (1.4%) and $0.8 billion (0.2%), respectively. There was $29.4 billion (6.4% of total) of commercial/multifamily originations not specifically listed in the above classifications and labeled "other investor type" by participants.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
