M&T Realty Capital Corp. is beginning 2022 with ambitious plans to increase its multifamily financings as part of an effort to double its real estate loan volume over the next two to three years. To achieve those goals, it is leveraging a new leadership structure and a recently announced strategic partnership with the Marcus & Millichap Capital Corp.
M&T Realty Capital, M&T Bank’s commercial mortgage banking subsidiary, recorded $5.1 billion in loan volume in 2021, a level that was just below its high watermark of $5.2 billion in 2019, says Michael Berman, CEO of M&T Realty Capital. Multifamily loans made up of the lion’s share of financings, he adds, and the sector provides a significant growth opportunity going forward.
“Multifamily is a hot a sector right now — everyone is trying to invest in it,” he says. “It’s just an extraordinarily healthy asset class because of its supply and demand dynamics.”
Indeed, the U.S. apartment market enjoyed a banner year in 2021 across all measures. Investment volume reached a record $335.3 billion, nearly 75 percent above the record volume of $193.1 billion posted in 2019, according to commercial real estate brokerage CBRE.
Meanwhile, renters absorbed 617,500 apartment units in 2021, another record, CBRE reports, and the average apartment vacancy rate of 2.5 percent at the end of the year represented a decline of 2.2 percentage points from 12 months earlier. Those conditions, created largely by a jobs recovery, wage growth and rising household formation, helped push up net effective rents by an average 13.4 percent in the fourth quarter compared to a year earlier.
To capitalize on that momentum — and to increase its book of real estate business overall — M&T Realty Capital promoted Mike Edelman to president in January. He joins Berman, who became CEO in April 2019, and Christine Chandler, COO and chief credit officer, in an effort to lead the organization to the next level of growth.
M&T Realty Capital continues to focus on serving M&T Bank balance sheet borrowers who are transitioning from construction or bridge loans to permanent debt — a source of $2.3 billion in loan volume in 2021. It is also bringing more life insurance companies and debt funds into its universe while increasing business with Fannie Mae, Freddie Mac and the Department of Housing and Urban Development (HUD).
Its strategic alliance with Marcus & Millichap’s financing subsidiary, specifically focusing on multifamily deals of around $10 million or more, is another key part of the strategy of building up its volume, Edelman says.
The partnership, announced in October, combines Marcus & Millichap’s multifamily brokerage and origination capacity with M&T Realty Capital’s access to agency funding and other capital sources, according to comments made by Marcus & Millichap CEO Hessam Nadji during the company’s third quarter earnings call. Through three quarters of 2021, Marcus & Millichap completed $16 billion in apartment deals, he further told analysts. As part of the deal, Marcus & Millichap made a preferred stock investment into M&T Realty Capital.
“Leveraging the sales market through the Marcus & Millichap partnership is going to be a huge opportunity for us,” Edelman explains. “We continue to see growth in demand for apartments from renters as well as investors. And we feel that this is a big way that we can take advantage of that market and increase the amount of volume that we do annually.”
What’s more, M&T Bank’s merger with People’s United Bank, which recently received regulatory approval, will help solidify its traditional Mid-Atlantic and New England base. Still, the bank’s expansion into Florida and in the Pacific Northwest over the last few years, along with its partnership with Marcus & Millichap, provides M&T Realty Capital with the ability to augment its presence in those areas and to expand into Texas, the Midwest and West, Edelman says.
“We anticipate a lot more business coming our way in the coming years,” he adds.
M&T Realty Capital is also ramping up its affordable housing business, Berman says, and has hired a dozen new people in the department over the last 20 months. In 2021, the mortgage bank provided almost $1.8 billion in debt and $178 million in low-income housing tax credit (LIHTC) funds to affordable housing developers.
“We’re trying to dramatically increase our affordable housing volume and are working hand-in-glove with the bank to grow our presence nationally as well as in our mid-Atlantic and Northeast footprint,” he explains. “Affordable housing is core to our mission.”
Among other deals, M&T Realty Capital played a pivotal role in financing Rye Street Residential, a 254-unit mixed-income apartment project under construction in the ambitious $5.5 billion, 235-acre Port Covington redevelopment in Baltimore. M&T Bank provided a $73.5 million in construction loan to Weller Development, and M&T Realty Capital has arranged permanent takeout financing through Freddie Mac’s Optigo Targeted Affordable Housing solution, Chandler says. The complex deal also included $5 million in state low-income tax credits, tax exempt bonds and private financing.
“The bank has the benefit of knowing that permanent financing is already in place,” she adds. “It’s a holistic approach that we take when we’re working with customers.”
The Rye Street project is part of Port Covington’s $650 million mixed-use first phase, which will feature 1.1 million square feet of new residences, offices, retail and public space on the Middle Branch of the Patapsco River. Financing for the phase includes $137.5 million in tax increment financing bonds and $154 million in Goldman Sachs opportunity zone funds.
— By Joe Gose. This article was written in conjunction with M&T Realty Capital Corp., a content partner of REBusinessOnline. For more articles featuring M&T Realty Capital Corp. via sister publication Seniors Housing Business click here.
All loans are subject to receipt of a completed application, credit approval and other conditions.
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