“The banks are stepping in softly with their top-tier clients and customers, but life companies on the permanent side are becoming a fairly significant source of capital for people and have become a good alternative to the GSEs,” says Wood Partners’ Jacobson. “Even if something [dire] happens to Fannie and Freddie, I think the life companies at least on the acquisition side will probably make up the void, which means, of course, they’ll be able to charge more and rates will go up a little bit.”
On the banking side, Northmarq characterizes almost a club mentality among lenders who will ask clients to run a vigorous underwriting gauntlet upfront but will tend to increase the offering of financing vehicles to those TLC clients who have made muster. “You have to act like a public company with a certain amount of transparency, liquidity, and net worth,” Ross says. “But once a firm has been blessed, that bank will then do a lot for the client—land loans, bridge loans, a lot more things.”
#8 Distress will Disintegrate.
One thing that banks seem continually unlikely to do in 2011 is stage a distressed asset dump on the market. With NOI improvements and a competitive deal space throttling asset values, the workout of troubled loans seems destined to continue. Even CMBS maturities, set to begin in earnest this year with volume increasing into 2013, aren’t likely to result in RCA-era fire sales.
“I think the distress has already been sold off to the market—that business ran its course in 2010,” Jacobson says. “If a bank is still holding a note, it’s because they have likely worked out issues with the sponsor or they just decided to wait out the recovery. The banks that waited over the past year have seen their valuations increase and have seen the markets save them. Likewise, you’d think some of these huge CMBS servicing companies are going to get tired of asset managing the portfolios they have, but I have not seen anything but B and C product come out of that sector. They are holding on to the really good stuff because they can make money off of it for themselves and their clients.”
#9 The Privates might Go Public.
With distressed asset dumps and major portfolio buys out of the picture, market watchers asked to identify the biggest apartment deal of 2011 almost unanimously pointed to an IPO—or even several IPOs—hitting the multifamily REIT space. “I wouldn’t be surprised if there is a very significant multibillion-dollar deal that goes from private to public,” Jacobson says. “The REITs are flush with cash, their stocks are trading great, and their yields are great. I can’t name names, but there are plenty of private companies that control 20,000, 30,000, 40,000 units in markets such as New York or San Francisco that seem poised for an IPO.”
