10C — January 11 - 24, 2013 — 2013 Forecast — Mid Atlantic Real Estate Journal
www.marejournal.com
2013 F orecast
By Marc Tropp, Eastern Union Commercial Eastern Union is on pace to having a record-setting year
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f 2012 is any indication of what is to come in 2013 for real estate owners
boom: Eastern Union Fund- ing had its best year since 2006. We began 2012 clos- ing deals with large region- al commercial lenders and ended by expanding those relationships to include Wall Street lenders. We further anticipate that Wall St. will come back even stronger in 2013. We expect an increase in the refinancing of CMBS notes, since the Federal Re- serve has indicated that rates will stay low in 2013. Many of the notes that are
coming due are on properties that are close to being under- water due to both decreased property values and many tenants renegotiating their leases to lower rent. Lower rates will allow the owners to offset the loss in rent rev- enue by refinancing without having to raise additional equity for the property. Since 2009, many own- ers had been sitting on the sidelines, waiting to see how the financial and real estate markets would unfold. They were concerned about pur-
chasing property that would see a drop in value. But dur- ing 2012, owners decided they could no longer ignore the incredible opportunity of locking in a loan under four percent. These histori- cally low rates were a strong catalyst for the banner year seen by banks in commercial lending. The real estate lendingmar- ket was marked by a major shift. At Eastern Union alone we observed a 50 percent increase in our core markets
for construction financing of apartment buildings in 2012 over that of 2011. While lend- ers are starting to approve construction loans again, equity requirements are still high. But at the same time, rents remain steady and cost of construction is relatively low. Only time will tell what the outcome will be of these converging realities, but we anticipate that construction financing will remain strong in 2013. In fact, apartment financ- ing, both permanent and construction, was more than half of Eastern Union’s 2012 business. We believe that apartment rentals will con- tinue to grow and therefore the financing opportunities will increase as well. The primary demographic of apartment renters is those between the ages of 24 and 35. We anticipate that this group will rent at higher rates in 2013 as they are increasingly transient, and stricter underwriting re- quirements make it more challenging to qualify for a home mortgage. With the overall improve- ment in the lending market, we brokered more than $1.2 billion in loans in 2012 and anticipate that the number will double in 2013 as real estate owners continue to take advantage of the low rates. We are seeing borrow- ers paying defeasance pen- alties in order to take new loans that will lock in low rates for the next ten years. Over the past 12 months alone we have received an average of 250 new deal sub- missions per month. Eastern Union Funding is the only commercial mort- gage company that primarily focuses on small to mid-size owners and closes more than $1 billion in brokered financing per year. And with market shifts indicating that 2013 has all the components to be a turning point in the U.S. commercial real estate market, we expect the year ahead to be our most suc- cessful yet. Marc Tropp is manag- ing director of Eastern Union Commercial. n
and brokers, E a s t e r n Union is on pace to have a record-set- t i ng year. 2012 began with prom- ise that at some point, the market
Marc Tropp
would take a positive turn. Not only was 2012 ground- breaking, it ended with a
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