EDR Annual Client Summit Conditions in the Commercial Real Estate Debt Markets
May 8, 2013
2
Sources of Commercial Real Estate Debt
• CMBS (Securitization)
• Commercial Banks• Government• Private Equity• Life Insurance
Companies• REITs• Private Debt Funds
─ Growing─ Active─ Stabilizing─ Active─ Stabilizing─ Emerging─ Emerging
3
CMBS Primary Market Activity
2011• $30.2 billion
– (28 deals)• $13.7 billion in
Freddie Mac– (12 deals)
• $350 million in FDIC – (1 deal)
2012• $45.8billion
– (57 deals)• $21.2 billion in
Freddie Mac– (17 deals)
• $449 million in FDIC – (1 deal)
Source: Trepp, LLC
4
Loan Performance
5
Reduced Bank CRE ConcentrationsBy Bank Size
Sources: Call Reports, FDIC, Trepp LLC
Number of Banks/Thrifts with CRE Concentration*
* CRE Loans (excluding Owner-Occupied Mortgages).
6
U.S. CMBS Collateral PerformanceThe Worst Is Over
Source: Trepp, LLC
7Source: Trepp, LLC
U.S. CMBS Collateral PerformanceRemaining Delinquencies Are More Serious
8
Delinquencies > 90 Days
Note: CMBS Delinquencies include Foreclosure, REO, Non Performing Balloon Loans
Source: Trepp-CREFC Portfolio Lender Survey, Trepp BankNavigator
Total Realized Net Losses
9Source: Trepp-CREFC Portfolio Lender Survey, Trepp BankNavigator
10
U.S. CMBS Delinquency Rates: Significance of Regional Variation
12.41%
10.77%
9.17%13.59%
6.36%
12.94%
6.29%
8.08%11.37%
Source: Trepp, LLC
11
Property Performance
Office - CBD
Office -Sub
Apartment
RetailIndustrial
75
95
115
135
155
175
195
215
235
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12
Source: Moody’s/RCA
National Commercial Property Price Index
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
BillionsIndividual PortFolio
-100%
0%
100%
200%
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
Year-Over-Year % Change
US Quarterly Volume By Property Type
Source: RCA
Apartment
Office
Retail
Industrial
Hotel
YOY Change (bps)2012 Avg Cap Rate2012 Volume ($bil) YOY Change in Volume
$85
$78
$53
$37
$20
47%
19%
20%
4%
-2%
6.1%
7.1%
7.3%
7.7%
7.8%
(23)
(28)
(25)
(8)
(1)
US Quarterly Volume By Property Type
Source: RCA
Office - CBD
Off ice - Sub
Apartment
Retail
Industrial
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
9.5%
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12
Average Cap Rates by Sector
Source: RCA
16
Into the Future
17
Commercial Real Estate Debt MaturitiesAnnual Maturities by Lender Type
050
100150200250300350400
2013 2014 2015 2016 2017Banks CMBS Life Cos Other
Source: Federal Reserve, Trepp LLC
$ Billions
18
Additional Opportunities in Maturing CMBS Loans
Source: Trepp, LLC
19
Additional Opportunities in Maturing CMBS Loans
Source: Trepp, LLC
20
The Box Score
21
In Summary
• Past the worst• Recovery is not overly robust-but is
happening• Clearly not affecting all markets equally
22