Consolidation in the agency-lending space is picking up speed. The arranged marriage of Jones Lang LaSalle Incorporated (NYSE: JLL) and HFF, Inc. (NYSE: HF) combines two more of the agency powerhouses. This comes not long after the announced matchup of two other public firms with agency licenses, BB&T Corporation (NYSE: BBT) and SunTrust Inc. (NYSE: STI).
JLL’s announced acquisition of HFF has already had much ink spilled on it, and yet more will follow. At CrediFi, we wanted to share a few fact and data-driven thoughts as to the impact of this on financing markets.
Both JLL and HFF are substantial players in the multifamily finance world, in addition to their brokerage activities both in and outside the multifamily sector. To be clear, the vast majority of both firms’ financing transactions as principals (not their brokerage activity) are in loans to multifamily properties that then get securitized onward through the agencies, Freddie Mac and Fannie Mae. HFF puts its loans through Freddie as its favored outlet, while JLL sells its loans to both Fannie and Freddie.
Two corners of the US look to be the most impacted by this consolidation – Texas and California. The state of Texas is likely to be the one most impacted – HFF and JLL each have about 25% of their recent origination activity in Texas.
It’s not only Texas – California may be dreaming of benefits from this matchup as well, as both have about 12% of their lending activities in California, particularly in greater Los Angeles. Other important geographies for HFF include Colorado, while JLL has placed sizable numbers of recent loans in Florida.
Main MSAs due to be impacted include Dallas-Fort Worth, Houston and Austin. Alongside these, the metro areas around Atlanta, LA, Miami, Minneapolis, and Washington DC seem set to be affected, as one or both of the players have strong footprints in these cities.
With the strong position that BB&T and SunTrust have in the Southeast, it seems that several southern markets are going to experience stronger competitive dynamics. This will not only impact the players named here, but Wells Fargo & Co (NYSE: WFC) and Bank of America (NYSE: BAC) as well. Both of these players have strong positions in various markets in the US South and in California.
Finally, it’s worth noting that Freddie and Fannie are keeping up their pace of funding this year. In the “capped” lending space, they are deploying $35 Billion each in new lending. The faster all of the consolidating firms can get their mergers approved, the sooner they can continue driving benefits from their valuable licenses as approved lenders.