(To read more on the debt and equity markets, click here.)

SAN DIEGO-While the perfect storm is where multiple weather conditions conspire to wreak havoc of epic proportions, economists at the Mortgage Bankers Association’s annual conference say different conditions are taking place in their chosen field. Jamie Woodwell, MBA’s senior director of commercial/multifamily research, called it “a perfect calm” at a luncheon yesterday.

Woodwell said that three key points are leading the way to a remarkable era in the capital markets. Capital availability, improving property markets and innovation in lending vehicles, “whether on the debt or equity side, are making it easier for investors to find risk/reward objectives,” Woodwell said.

Those factors have caused an influx in activity. “Commercial/multifamily mortgage originations ended the year on a very strong note, with the 4th quarter setting a new record for volume,” he added. The 4th quarter 2006 was 3% higher than the same period in 2005 and a 27% hike over 3rd quarter numbers for 2006. Fourth quarter activity was up in almost all product types versus 4th quarter 2005, with an increase in originations for hotel properties (20%), offices (8%), industrial (3%) and multifamily (2%). Seeing a decrease were retail (5%) and health care properties (7%).

The luncheon panel also took a macro-economic outlook on the commercial real estate industry, and in particular, the multifamily market. Kieran P. Quinn, MBA’s chair-elect and chairman and CEO of Column Financial Inc., a Credit Suisse Co. and Douglas G. Duncan, a PhD and MBA’s chief economist and senior vice president for research and development, joined Woodwell in the discussion.

Duncan said although the nation has been strapped with a housing downturn of late, the economy has been going gangbusters. He predicted GDP to follow a robust 3% growth pattern for the year. “The availability of capital is a global phenomenon holding long term rates down,” he said.”

Employment will also be a key indicator to watch in the coming months. Duncan said employment has been “the nexus between residential and commercial” activity. Just as the residential sector has slowed, the commercial sector has sucked up any vacuum in activity. And unemployment numbers have stayed very strong, holding at 4.6% for everyone, while “unemployment numbers for people with a four-year education is at less than 2%,” Duncan said.

Quinn pointed to other factors impacting the industry. “Delinquencies are at an all time low,” he said. Quinn added that the products are getting more complex and the current cycle has “gone on for 14-15 years. It’s usually a seven-year cycle.” Lenders are using more discipline and the deals being spread out to multiple levels on the lending side have kept the cycle going and helped keep the risk vs. reward problem under control.

One aspect of the industry that must be kept in check moving forward is the issue of insurance. “It is critical to the commercial and multifamily finance markets that TRIA be extended, a public-private partnership remains necessary to assure that terrorism insurance is available and affordable,” Quinn said.

MBA officials are concerned that Congress and the Administration believe “the extension of TRIA past 2007 is not necessary.” The organization also objects to the proposed budget, which proposes an increase in insurance premiums for several multifamily programs. The higher premiums will “increase rents on low- and moderate-income families merely to generate revenue for other activities in the federal budget,” according to an MBA report.

MBA’s Commercial Real Estate Finance / Multifamily Housing Convention & Expo is being held Feb. 4-7 at the Manchester Grand Hyatt San Diego. According to Quinn, more than 5,000 people will attend the conference.

Among those is former president, George H.W. Bush, who kicked off the event with a keynote address. Bush steered clear of political commentary, favoring instead fly fishing anecdotes and details of an upcoming skydiving adventure at the age of 85. “You’re never too old to try new things,” Bush said.

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