Berkadia Experts are Bullish on Outlook for Multifamily Lending, Acquisition

By Paul Bubny

Ahead of the inauguration of President Joe Biden and Vice President Kamala Harris, Berkadia experts mapped out what’s ahead for the multifamily investment sector this year, via a one-hour webinar. Their consensus: challenges or no, the apartment sector outlook remains upbeat.

“Entering 2021, we are still living in challenging times, facing both a pandemic and economic uncertainty,” said Berkadia CEO Justin Wheeler. “That said, commercial real estate activity—acquisition, financing and so forth—continues apace.”

Wheeler is optimistic about the industry and Berkadia for a number of reasons: a “tidal wave of maturing loans,” coupled with historically low interest rates; a growing pool of yield-hungry investors; and continued liquidity support from the GSEs.

Aneta Markowska, chief financial economist with Jefferies, provided a look ahead as well as a summation of the year just past. Key themes for 2021 include “the Great Reflation,” with distribution of the vaccine and another $1+ trillion in expected stimulus measures helping to drive the economy back toward full employment by the end of 2022.

Markowska also forecast a shift in growth drivers from consumer goods to services and capex investment moving from an emphasis on the tech sector toward more traditional industries; and a move-up of the liftoff in Federal Reserve fiscal policy to early 2023—up from the originally projected 2024. This will probably put “significant upward pressure on Treasury yields,” she said.

With the timeline for increasing the federal funds rate now moved up, “we’ll watch the Fed very carefully,” said Ernie Katai, EVP and head of production at Berkadia. He added that in view of a continuing stream of deliveries, absorption of new multifamily product will also bear close scrutiny from the Berkadia team.

Keith Misner, Berkadia’s head of investment sales, noted that even with a decline in volume compared to 2019, multifamily still racked up $122 billion of transactions last year. That’s well ahead of second-ranked industrial, which amassed an investment sales total of $86 billion for 2020.

Comparing last year’s pandemic-driven slowdown to the Great Recession, Misner pointed out, “We went down to $17 billion in 2009. $122 billion in 2020 doesn’t seem all that bad.”

For this year, he said, three themes are emerging in the investment sales market. They include the rise of single-family rentals, greater emphasis on ESG strategies and movement toward converting hotels to multifamily.

Hilary Provinse, head of mortgage banking at Berkadia, noted a shift in the GSEs’ multifamily lending recently. By necessity due to the mandate Fannie Mae and Freddie Mac have gotten from the Federal Housing Financing Agency, their lending has moved more toward the affordable and mission-driven sectors

Not that this will put much of a crimp in the availability of debt. Provinse said Berkadia expects a number of capital sources to step up their activity this year, including life companies, banks, CMBS and debt funds. “We think they’re going to pick up the slack where the GSEs may be limited.”

The webinar was capped by a conversation between Dori Nolan, SVP of client services at Berkadia, and her newest colleague: Mary Ann King, co-head of investment sales and head of Berkadia Institutional Solutions, powered by Moran. The discussion occurred against the backdrop of Berkadia’s announcement that it had acquired the multifamily mortgage platform of Moran and Company, thus expanding its reach in the institutional sector.

Replays of the one-hour webinar are available by clicking here.

For comments, questions or concerns, please contact Paul Bubny