John Cannon, head of production at Freddie Mac, is very optimistic about 2013.
In his view, the industry momentum that characterized 2012 should be maintained next year. With interest rates likely to remain low and the CMBS sector slowly but surely re-emerging, Cannon expects to see more liquidity in 2013.
He recently sat down with apartment finance today to offer his views of the year that was and a glimpse of the year to come.
What are some of the 2012 highlights from Freddie Mac?
The highlights would be the earnings of the business; our earnings through six months were $942 million compared with $559 million for the same six-month period ending last year. It’s up 68 percent on a year-over-year basis for six months.
We’re very proud of our production, we’re very proud of our earnings, and we’re very proud of the fact that we issued these K-deals, which are multifamily mortgage securitizations. Through Sept. 30, we’d issued $15.7 billion of K-deal collateral. (Editor’s note: For more on Freddie’s K Certificates, see page 10.) That’s $2 billion more than what we did in the entire 2011 period.
Do you think you’ll have a similar share of the market this year as you did last year?
I would expect our market share this year to be equal to, maybe slightly higher than, last year. I would hope and expect the market share would actually decrease in 2013. I know that sounds strange coming from anyone, but that would actually represent a good thing. That means private capital is re-entering the market.
To what degree has the private sector stepped up? Where are you seeing the most competition?
We’ve clearly seen a re-emergence of what I would call capital markets, the artist formerly known as conduit lending. Now, it’s been slow, but it’s been steady, and so I would expect that slow and steady growth of conduit executions to continue into 2013. I would expect to see more competition from the conduits for the next 18 to 24 months. We welcome that; it’s a good sign to the market. That indicates health in the market.
Do you expect 2013 to be another strong year for the multifamily sector, or is the industry starting to decelerate?
A year ago, I said that 2012 would be strong, and 2012 looks pretty darn good. And it’s a good sign that there’s liquidity in the market and deals are transpiring.
Our K deals have been very well received and it looks like they’re going to continue to be well received into 2013. We’re very proud of that.