The Loews Hotel buzzed with optimism on the first day of the CREFC January conference, as over 1,300 attendees descended on South Beach. After catching up with many friends, the Monday morning session began with lively meetings of the Agency Investors Forum, the High Yield and Investment Forum, the Issuers Forum and the Portfolio Lenders Forum. Panelists at the forums expressed a general sense of optimism for 2013 and expect the general market trends of 2012 to continue into 2013.
Despite the general optimism, panelists at the forums agreed that 2013 will not be without challenges. Many panelists believe that the biggest risk to the capital markets for 2013 will be the implementation of Dodd-Frank and the possibility that the regulations will impose risk retention and holding period requirements on CMBS sponsors and B-Piece buyers.
If the morning forums did not dampen the expectations of many attendees, Monday’s featured speaker, David Malpass, threw a bucket of cold water on it with his outlook for the world economy over the next year. Among the risks that David sees to the capital markets in 2013 are rising interest rates, over-regulation by the government, the threat of congressional grid-lock and the fiscal cliff, central bank policies that David views as contractionary, a slowing global economy (in particular, the threat of recession in Europe) and the possibility that the euro crises will return in the fourth quarter of 2013. According to David, quantitative easing and other central bank policies are creating an artificial environment of low interest rates, and as the federal reserve pulls back on quantitative easing, rising interest rates will likely lead to a decline in real GDP growth through 2013.
The sobering outlook delivered by David Malpass left many of us feeling the need for a drink, and over 380 other attendees who enjoyed Dechert’s reception at the SLS hotel on Monday night seemed to agree. Day 2 of CREFC will bring more lively discussion and debate over the future of commercial real estate, but for now, the good food and drinks and great friends are helping us to forget our worries for one more night.
By: Ken Hackman and Matt Ginsburg