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Capital Markets Round Up: SunTrust Out To Grow CRE Lending Again

Also This Week: Commercial/Multifamily Mortgage Debt Outstanding Falls Slightly in Q1; and New Money To Spend
June 24, 2013
Prior to the Great Recession, SunTrust Bank was one of the primary providers of commercial real estate capital. Now the bank, one of the largest in the Mid-Atlantic and Southeast, is gearing up its CRE lending again.

Aleem Gillani, CFO of SunTrust Banks Inc., speaking at the Morgan Stanley Financials Conference 2013 last week said the bank has put its distress problems behind it and is back to "focus on growth."

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“We have plenty of balance sheet capacity to support this growth as current CRE loans are only about 4% of our balance sheet. And you can see that we’ve reached the inflection point in this business. In fact, last quarter was the first quarter that we saw growth in our core loan balances since before the economic downturn. Also, after several straight years of losses, this business returned to profitability in the first quarter,” Gillani said.

SunTrust said it will use a targeted approach to grow its retail, office, multifamily and industrial CRE relationships.

“We’re targeting clients and prospects that have track records of success and sustainable capital and liquidity structures, where we can realize sizable, profitable relationships,” he said. “This will create a more diversified portfolio from both a geographic and product perspective than what we had previously”

“We’re also building out our REIT business,” he added. “Further, we’re leveraging the network that our experienced CRE leadership team has via pursuing institutional investor opportunities to further augment growth.”

Commercial/Multifamily Mortgage Debt Outstanding Falls Slightly in Q1

The level of commercial/multifamily mortgage debt outstanding decreased by $4.9 billion, or 0.2%, in the first quarter of 2013, the first quarterly decrease since the third quarter of 2011, according to the Mortgage Bankers Association.

The $2.41 trillion in outstanding commercial/multifamily mortgage debt was $4.9 billion lower than the fourth quarter 2012 figure.

Multifamily mortgage debt outstanding, however, rose to $842 billion, an increase of $4.1 billion, or 0.5%, from the fourth quarter of 2012.

“After five quarterly increases, the amount of commercial and multifamily mortgage debt outstanding fell slightly in the first quarter,” said Jamie Woodwell, MBA’s vice president of commercial real estate research. “Banks and thrifts, Fannie Mae, Freddie Mac and FHA increased their commercial and multifamily holdings, but the balance of loans in commercial mortgage-backed securities resumed its decline.”

Commercial banks continue to hold the largest share of commercial/multifamily mortgages, $839 billion, or 35% of the total.

CMBS, CDO and other ABS issues are the second largest holders of commercial/multifamily mortgages, holding $562 billion, or 23% of the total.

Agency/GSE portfolios and MBS hold $383 billion, or 16% of the total.

And life insurance companies hold $322 billion, or 13% of the total.

Multifamily Mortgage Debt Outstanding
Looking solely at multifamily mortgages, agency and GSE portfolios and MBS hold the largest share, with $383 billion, or 45% of the total multifamily debt outstanding.

They are followed by banks and thrifts with $237 billion, or 28% of the total. CMBS, CDO and other ABS issues hold $69 billion, or 8% of the total; state and local governments hold $63 billion, or 8% of the total; life insurance companies hold $51 billion, or 6% of the total; and nonfarm noncorporate business holds $15 billion, or 2% of the total.

Capital Markets Round Up

Boston Properties Inc. agreed to sell $700 million of 3.8% senior unsecured notes due 2024 in an underwritten public offering. The net proceeds will be used for investment opportunities and debt reduction.

Kennedy Wilson successfully completed fundraising for Kennedy Wilson Real Estate Fund IV with capital commitments of $303 million, including $15 million contributed by Kennedy Wilson itself. Fund IV’s investor base spans the U.S., Europe and the Middle East and includes pension funds, university endowments and family offices. Fund IV has amassed a portfolio of 26 investments throughout the Western U.S. since mid-2011.

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