Retail Traffic described Holliday Fenoglio Fowler L.P.’s third quarter conference call-during which execs from the CRE intermediary noted some strong fundamentals in the commercial sector-as an optimistic indicator for commercial real estate lending.

While the recent MIT TBI index showed a 2.5 percent drop in the value of commercial real estate debt in pension funds, there appears to be a sufficient number of cash buyers to keep cap rates from skyrocketing during the next few months.

HFF execs cited their company’s third quarter numbers-a 23.8 percent revenue increase for a total of $68 million-as evidence of CRE’s fundamental strength. Though HFF operating income decreased by 3.9 percent to $13.6, production volume rose by 63.8 percent to $11.9 billion for 300 transactions, up from 2006 figures of $7.3 billion for 309 transactions.

Figures included a 153.3 percent increase in investment sales and a 15.2 percent increase in debt placements, which translate to $5.5 billion and $5.6 billion respectively.

The CMBS and CDO segments of the commercial real estate industry have been the hardest hit. As reported in an earlier post, the action of an Ohio federal judge in throwing out an action to reclaim 14 mortgages for which the plaintiff could not produce evidence of ownership highlights sloppy CDO management procedures that are understandably making commercial real estate investors nervous.

Growing demand by CMBS investors led some underwriters to relax their standards in order to be able to issue enough loans to satisfy the burgeoning bond investment market. However, CMBS lenders are now eliminating the riskiest loans in their portfolios to pique investor interest in buying CMBS bonds.

According to real estate research provider Torto Wheaton Research, CMBS loans account for 22 percent of the $3 trillion U.S. commercial and multi-family real estate lending market, making CMBS second only to the 43 percent market share held by commercial banks.

Tags: commercial lenders, commercial lending, commercial real estate investments, commercial real estate lenders

Posted in Commercial Real Estate | No Comments