Opportunities Ahead for Multifamily Financing in 2021

July 15, 2021

2021 has been an exciting time for us at Berkadia. Overall, we’ve seen production begin to indicate a return to pre-pandemic levels, not just meeting those levels but exceeding our historic volume totals Specifically, our Berkadia investment sales team had a record-setting first half of the year. As a result, our mortgage banking business has seen an increase in acquisition financing—continuing a similar hot streak for our  financing teams. In total, we have closed almost $15 billion in financing since the start of the year.

As we reflect on this exciting momentum, we also have a keen eye trained towards the future. The wealth of capital and lending activity over the past few months have left us optimistic that sales and financing activities will remain strong throughout the remainder of this year.

Lending Activity to Come

A driving factor of our current activity levels has been our continued partnership with Government Sponsored Enterprises (GSEs), like Fannie Mae and Freddie Mac. In the remainder of the year, we expect GSEs will continue to be actively focused on meeting mission-driven requirements—most notably, Affordable housing. At present, current mission-driven figures for GSEs are exceeding their targets, creating room for quality non-mission business—such as traditional multifamily—that temporarily moved to alternative funding sources earlier in the year. With the recent Supreme Court decision that gave the White House the authority to replace the Director of the FHFA, we look forward to the changes in leadership that will hopefully enhance Berkadia’s ability to offer GSE funding capacity to our clients.

However, continued competition from life companies, debt funds and banks will remain. Life companies have been competitive for lower leverage, stabilized assets, and our current life company production reflects that—we’re readily outpacing our life company production for both 2019 and 2020. Debt funds are competing more aggressively for higher leverage, transitional assets—we’ve tracked more than 130 debt funds in the market.

Growing in Key Areas

The flurry of activity we’re seeing has affirmed the need for us to provide a diverse roster of lending sources to clients to meet the needs and challenges of the current competitive environment. We’re especially proud of the tremendous growth we’ve seen in our Affordable, Small Loans and HUD offerings. We grew our affordable volume by over 400% in first quarter alone, and we expect 2021 to be a record setting year. At the same time, Berkadia Small Loans continues to add talent and grow its footprint, most recently with the addition of industry leading lending professionals Adam Dosskey and Rob Doxsee. Berkadia’s HUD specialists have completed more than $1.25 billion in financing in the first quarter of 2021 on the heels of a record setting 2020, with more than $3 billion in closed HUD financing.

While we continue to add talent and resources to our existing platforms and offerings, we’re also working to develop new products and services for our clients. At the start of 2021, we launched Berkadia Institutional Solutions, powered by Moran, aimed at providing tailored advice and support to institutional investors. We’re excited to bring this opportunity to clients as yet another tool in our toolbox that helps them achieve their long-term goals.

A final key growth focus for Berkadia, and one that I’m arguably most proud of, is the important work we’ve been doing to enhance our diversity, equity, inclusion and belonging initiatives. We’ve undertaken a comprehensive assessment of our opportunities for growth internally and are enacting the change needed to ensure that Berkadia is a diverse and inclusive place where everyone feels accepted and that they have an equitable opportunity for success. At the same time, we’re expanding our DEIB partnerships with industry organizations and partners to make sure that we’re working collectively to ensure our industry looks more like our world.

Our Roadmap for the Future

Over the past year, our role as advisors to our clients has shifted—and we are still seeing it continue to evolve, as perfectly evidenced by our growing teams and offerings. Whatever is to come, we are committed to applying our diverse and highly specialized teams to diligently partner with every client through both the ups and the downs. From helping our clients understand how to protect their portfolio from a downturn, to knowing the right time to seize opportunities in the most active market we’ve ever seen, we will continue to ensure they are best set up for overall long-term success.

In the remaining months of 2021, we continue to have our ear to the ground on worry spots, like rising interest rates and inflation, that we know are keeping our clients up at night. We will also keep an eye on the direction of the GSEs under a new FHFA head. While there’s always potential for unforeseen hurdles, we continue to keep our finger on the pulse of the market and remain not just optimistic but enthusiastic for what lies ahead.

-Hilary Provinse, EVP and Head of Mortgage Banking

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