John Cannon, head of production at Freddie Mac, has high hopes for 2013.
In his view, the industry momentum that characterized 2012 should be maintained next year. With interest rates and capitalization rates remaining low and the CMBS market reemerging, Cannon expects further growth in the market next year.
He recently sat down with Multifamily Executive to offer his views of the year that was, and the year to come.
MFE: What are some of the 2012 highlights from Freddie Mac? Any deals you would like to spotlight?
Cannon: The highlights would be the earnings of the business, and the earnings of the business through six months were $942 million compared to $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 is multifamily mortgage securitizations, and through September 30 we’ve issued $15.7 billion of K-deal collateral. And that’s $2 billion more than what we did in the entire 2011 period.
MFE: Do you think you’ll have a similar share of the market this year as you did last year?
Cannon: 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 entering back into the market.
MFE: To what degree has the private sector stepped up? Where are you seeing the most competition?
Cannon: We’ve clearly seen a reemergence 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; that represents a good sign to the market. That indicates health in the market.
MFE: Earlier this year you said that you were trying to attract more private capital. Have you been attracting it as intended?
Cannon: I think that’s right. That’s been very well received for the balance of 2012 and it looks like it’s going to continue to be well received into 2013, now that private capital is interested in our K-deal securitizations. We’re very proud of that.