By Linda OFlanagan
Lending expert Annemarie DiCola painted a bright future for the city’s capital markets during a keynote speech at the annual Real Estate Weekly Women’s forum this morning (Wednesday).
“Numbers, like words, tell a story,” said the chief executive officer of Trepp, the securities and banking analysts. And the story is getting to a good part.
“On all fronts, lending for commercial real estate is on an uptick,” said DiCola. “Whether we look at the life companies, which are in a steady state of lending, to government and private equity sources, to commercial banks, to even emerging private debt funds – lending is back.
“Troubled properties still have issues, but we are seeing more capital flow to more markets, and not just the 24-7 cities like Manhattan.”
A rise in Commercial Mortgage Backed Securities issuance last year is a helpful sign for the market, said DiCola, explaining how banks and insurance companies are not “unlimited spigots” of cash and the alternate funding sources offered by CMBS help bridge the lending needs of the real estate market.
CMBS in the US is expected to top $70 billion this year as banks and thrifts continue to pay down and sell non-performing loans, eradicating a swathe of high risk from their books.
And while there is a 2-3 year supply of distressed loans in CMBS in the market right now, growth of that supply appears to be slowing, said DiCola.
News from the portfolio lending front is even more optimistic, according to the CEO, who said a Trepp survey of19 firms representing $135 billion in loans showed “outstanding performance” in commercial real estate sector.
DiCola told the audience of over 400 Women’s Forum attendees how a lack of new office construction and a revived jobs market has helped New York lower its CMBS delinquency rate, putting it ahead of neighboring New Jersey and Pennsylvania for the first time since before the market crash.
With billions of dollars in loans coming due beginning in 2015, she said at least $75 to $80 billion worth of CMBS issuance is needed annually just to properly address refinancing .
But with CMBS origination in the New York already very high so far this year, the sector is in a good position.
Cautioning that the industry has to maintain quality underwriting standards and avoid reacting to “volatile shocks” that can sway the economy, DiCola said, “We are optimistic for the long term and we remain particularly optimistic about New York commercial real estate.”