KeyBank’s Angela MagoThe leader of the prolific real estate lender shares initiatives and the outlook for 2016.

By Mallory Bulman, Associate Editor

As head of KeyBank Real Estate Capital, Angela Mago oversees one of commercial real estate’s top lending platforms. Leading a team of approxi-mately 700 that generates more than $40 billion in real estate financings annually, Mago has grown loan production to record levels since her appoint-ment in 2014.

Last year marked the third in a row that her team was ranked the top Fannie Mae lender in the senior housing sector, and in 2014, KeyBank was named a top-five Freddie Mac lender. Mago, who has been with the company’s real estate capital group since 2003, updated CPE on KeyBank’s plans, expecta-tions and goals.

New Visions

Q. Could you tell me about current initiatives at KeyBank Real Estate Capital?

A. Growing the affordable housing business is a stra-tegic initiative for KBREC. The number of Americans burdened by rent payments continues to grow, so

the demand for affordable rental housing is robust. We have had a very strong Community Development Lending practice in our footprint for many years. We have expanded that effort nationally because our Real Estate platform is national, with 22 offices across the country. Many of our market-rate multifamily clients across the country also participate in affordable housing, and our platform is able to meet a broad range of needs; we can provide debt, equity and Agency financing solutions to our clients.

Executive SummaryMago expects another robust year at KeyBank Real Estate Capital, with a large focus on affordable and seniors housing. Despite the moderate interest rate hike, she also predicts another high-volume year for Fannie Mae and Freddie Mac.

CPExecutive.com February 2016

Q. Are there any other recent or upcoming initiatives you’d like to mention?

A. We will continue to grow other parts of our franchise, including our highly successful Senior Housing business and our Institutional Capital business, as well as our

third-party loan servicing and mortgage banking businesses. We’ve historically been a very active senior housing lender, so it’s a strong niche for us and we continue to see good opportunity in that space. As the business has become more transparent, there are more in-stitutional investors that are paying attention to the space. Our plat-form capabilities and strong institutional expertise position us really well to serve that sector. We feel there will be good opportunities to continue to support senior housing and care over the next year.

Q. Among the variety of products and services KeyBank Real Estate Capital offers, does de-mand in any business lines appear to be grow-

ing especially fast? If so, does that tell us anything about what today’s investors and sponsors are looking for?

A. There will be a lot of commercial mortgage debt matur-ing in 2016, assets continue to trade hands and devel-opment has picked up. In addition, a great deal of eq-

uity capital has been raised in the CRE space, including significant interest from foreign capital sources. When you think about the prior peak periods in ’06 and ’07, there was a lot of transaction ac-tivity. Those 10-year mortgages are maturing. There will be a lot of refinancing activity as well as financing to facilitate acquisitions and development. Demand will be active across all our businesses, but we will be focused on debt refinancings and recapitalizations, well-capitalized acquisitions with good sponsors, and selective opportunities involving assets in transition and new development.

Q. In general, what are your expectations for the commercial real estate sector in 2016?

A. The operating fundamentals in CRE should remain positive in 2016 as the economy slowly improves. We will be paying close attention to construction and sup-

ply trends in multifamily, in addition to growing asset valuations across all of real estate, which are in excess of 20 percent above the prior 2007 peak for institutional-quality assets.

Q. To what extent do you expect last month’s decision by the Federal Reserve to raise the interest rates will influence commercial real

estate finance?

A. The quarter point uptick won’t make much of a dif-ference at all. We’ll have to see how short-term rates move in 2016, but the expectation based upon cur-

rent indicators is that incremental moves will be fairly modest. Longer-term treasury rates are impacted by other factors, in-cluding global capital flows and other economic data. With other global economies significantly weaker than the United States, demand for U.S. Treasuries has kept rates lower than expected. The initial rate adjustment was so well-anticipated that it really shouldn’t have a big impact. The question will be, at what pace will the Fed continue to raise rates in the future, and that will be driven based upon economic activity here in the U.S. and abroad.

Q.What’s in store for your Fannie and Freddie lending in terms of volume or any other trends?

A. The regulators for the Agencies (FHFA) issued score-cards for 2016 with $31 billion caps for both agen-cies. They have indicated they will evaluate production

every quarter, and if the size of the total multifamily loan market is deemed to have increased, they could increase the caps. That wasn’t the position they took in the past, so it appears to be a more accommodative policy if the overall market continues to grow. In addition, exclusions to the cap—which historically in-cluded affordable housing and manufactured housing units—were expanded from last year to include things like loans in certain rural areas, small loans, and loans to finance water or energy efficiency projects. In general, we would expect the agencies to have an-other robust year in 2016.

Q. In general, how confident are you that com-mercial real estate lenders and their custom-ers are being sufficiently conservative? Do

you see anything out there that gives you cause for concern?

A. I think some of the lenders with active real estate practices and large concentrations are trying to be prudent with their use of capital to avoid the prob-

lems of the last downturn. However, the regulators issued a bul-letin recently indicating that they are seeing substantial growth in CRE lending activity across banks. They have also indicated that recent examinations and industry outreach has revealed an easing of credit standards, including less restrictive covenants, extended maturities, longer interest-only periods, limited guar-antees and more policy exceptions. They’re sending out a little bit of a warning to the banks to be prudent and to be mindful of where we are in the cycle to avoid making mistakes that got some banks in trouble during the last downturn.

“We’ve historically been a very active senior housing lender, so it’s a strong niche for us and we continue to see good opportunity in that space.”

Posted with permission from Commercial Property Executive. Copyright © 2016. All rights reserved. #C47241 Managed by The YGS Group, 800.290.5460. For more information visit www.theYGSgroup.com.