Alliant CU Sees 'Heightened' Interest in Student Housing Commercial Lending
Commercial real estate continues to grow for the Top 10 and other lenders.
Results from the nation’s largest credit unions showed that commercial real estate lending continued to show strong growth in the third quarter, matching national trends.
The Top 10 credit unions by asset size originated $1.4 billion in commercial loans backed by real estate in the third quarter, up from $1.2 billion in the second quarter and $211.6 million in 2020’s third quarter.
The Top 10’s third-quarter volume included $93.1 million from the ninth-largest credit union, Alliant Credit Union in Chicago ($14.7 billion, 631,700 members). Its amount included about $51 million in financing for three student housing projects near Louisiana State University in Baton Rouge, Baylor University in Waco, Texas and the University of Tennessee in Knoxville.
Some of the strongest gains from 2020’s third quarter to 2021’s third quarter included:
- Pentagon Federal Credit Union of Tysons, Va. ($29.7 billion, 2.4 million members) going from essentially zero a year ago to $752.4 million.
- BECU of Tukwila, Wash. ($29.6 billion, 1.3 million members) rising 16 fold to $191.5 million.
- First Tech Federal Credit Union of San Jose, Calif. ($14.7 billion, 652,828 members) rising eight fold to $192.2 million.
The latest NCUA data for all federally-insured credit unions showed their originations were $10 billion in the second quarter — the highest amount since at least 2017. Second-quarter production was up 20% from the first quarter and up 41% from 2020’s second quarter.
And national data released Thursday by the Mortgage Bankers Association showed the momentum continued through the third quarter.
The MBA’s index of commercial and multifamily mortgage loan originations for the third quarter was the highest since at least the first quarter of 2018. It was up 119% from 2020’s third quarter and up 19% from the second quarter.
Multifamily projects also had a four-year record with its index up 105% from 2020’s third quarter and up 31% from the second quarter.
Alliant’s third-quarter originations were 13% higher than a year earlier, but in the previous three quarters originations ranged from $184.1 million to $115.8 million.
Paul Letourneau, Alliant’s commercial loan originations manager, said it expects to close another $200 million to $225 million in the fourth quarter, and that its 12-month volume for 2021 will be 50% higher than 2020’s volume.
“CRE lending has gained momentum in 2021,” Letourneau said.
Letourneau said reasons for the increase include Alliant expanding its market presence, increasing its average loan size and adding to its existing commercial team.
“Also, markets are recovering from 2020,” he said. “Investors that were on the sidelines are now re-entering the market, existing owners are refinancing to take advantage of the continued low interest rate environment, and select asset classes are benefiting from national trends on relocations, work-from-home and changing shopping habits.”
Jamie Woodwell, the MBA’s vice president of commercial real estate research, said commercial lending is strong with loans backed by industrial and multifamily properties each running at a record annual pace.
“Borrowing hit an all-time quarterly high during the third quarter, driven by strong or improving market fundamentals, higher property values, low interest rates and solid mortgage performance,” Woodwell said. “While year-to-date office and retail lending are each up significantly from last year, both remain below 2019 levels.”
In the multifamily sector, Alliant has been hitting the books on student housing.
“As college students returned to campus this fall, we have continued to see heightened investor interest in the student housing market, in particular near top-tier schools,” Letourneau said.
“When evaluating student housing loans, Alliant examines various metrics about the health and viability of the university, which encompasses trends in education, student population changes and the overall health of student housing properties within the market,” he said. “The majority of the properties Alliant lends into are strong Power 5 Conference Schools with deep roots, wherewithal and proven ability to retain and graduate their student body.”
In Baton Rouge, La., Alliant provided financing to Versity Investments to buy the 244-unit apartment building a mile south of the LSU campus. It is 100% leased for the current school year and historically has operated at near-full occupancy. The seller completed significant renovations to offer amenities, including lounges, two pools, a coffee bar, a fitness center and a grilling area. Versity Investments, which has borrowed previously from Alliant, manages more than 30 student-housing properties across the country.
In Waco, Alliant provided an acquisition loan for a complex of 116 apartments in three buildings with a combined 455 beds operating at capacity. Amenities included two resort-style pools and spas, a sand volleyball court, a basketball court, private jogging trail and a fitness center. Free high-speed internet and expanded cable TV are included in every unit.
In Knoxville, Alliant provided refinancing for the garden-style Maplehurst Park. Students rent 60% of the 196 units in 20 gardens and low-rise contiguous buildings. The property is between the UT campus and downtown and is operating near capacity. Upon acquisition, the sponsors invested $6.25 million in gut renovations of all units, as well as improvements to the facade and landscaping.