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[IMGCAP(1)]SAN DIEGO-If you look at the multifamily market and household growth in the US between 1995 and 2005, the increase in the homeownership rate meant phenomenal growth in ownership, but not in rent. So says Jamie Woodwell, VP of commercial real estate research at Mortgage Bankers Association. “Now, as we are going into a recessionary period, you are starting to see a contraction.”

Woodwell kicked off the Capital Markets for Multifamily panel at the MBA’s Commercial Real Estate Finance/Multifamily Housing Convention & Expo, held here at the Manchester Grand Hyatt, a conference that attracted more than 2,000 attendees. “With the singlefamily housing contraction, construction has dropped considerably,” he said. “We have seen a pull back in residential starts and completions.”

[IMGCAP(2)]In general terms, the multifamily sector is not seeing rent contraction as much as other sectors, said Woodwell. In terms of property performance, there are vacancy rates across every property type ticking up, with retail showing the most dramatic increase.

Following Woodwell’s introduction, experts from multifamily lending came together in a panel moderated by Shekar Narasimhan, managing partner of Beekman Advisors. The discussion began with the question of how the perception of risk has changed. “We are going to be a much more aggressive going forward,” said Phillip Weber, SVP of multifamily at Fannie Mae. “We are no longer in the era of ‘we’ll get to it later.’ “

Panelists also included Diana Reid, EVP of PNC Real Estate Finance; Sam Davis, senior managing director and head of real estate at Allstate; and Michael May, SVP of multifamily sourcing at Freddie Mac

The marketplace has gotten so much more conservative as the economic turbulence has gotten worse and worse, said Davis. “Cash flows are being beaten up,” he said. “The perception of risk going forward is ruling the day today.”

When asked about multifamily construction loans, Reid said that her company is selectively lending, but she noted the importance of sponsorship. “We really look to the sponsorship and the strength of that sponsorship,” she said. “It is a different age in banking, and recourse is definitely on the table now,” she added, noting that for her company, the risk management and asset management is key.

The panel then focused on how life changed after Fannie Mae and Freddie Mac entered into a conservatorship in September. Weber said that the next chapter is still to be written as far as what’s in store in the future, but “we know where we stand.”

Reid said that she was concerned with what a conservatorship would mean and was a little doubtful of things being “business as usual” in the beginning. She explained that her company reviewed every communication, every contract that formed the operation and the process “to make sure we knew our position as a lender.”

Reid continued that she has been “incredibly impressed by the dedication and quality of the attention and work the multifamily teams have provided.” Her worries however, were about keeping the tremendous amount of institutional knowledge around. The other thing that is very important here, she said, is that she is both hopeful and focused on how to keep the leadership to get back to the global capital markets.

The panel then switched gears and addressed whether or not there was a capital gap and how that gap would get filled. Davis says that a cap gap does exist. “I don’t think we can depend on Fannie and Freddie to keep doing what they are doing in this market,” he said. One major concern he said, is that after three years on the panel, he had never seen to many people sitting in the room, “which means that things must be really bad if they have time to come here.”

Reid says that there is plenty of risk capital to be invested available. “It is a pricing issue,” she said. “Senior financing is the problem. I think it will take confidence to bring it back.”

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