CREFC January 2022 – it was supposed to be the comeback conference. Everyone was pumped to spend a few days down south, getting together with their safely vaccinated clients, colleagues and friends. Meetings, mingling and mild mayhem were on the Miami menu. But days before the conference, the dreaded COVID, or more specifically Omicron, continued to rear its ugly head and put a damper on the plans of many. Emails with “Are you still going to CREFC???” were flying as the days counted down to January 9. Although many conference attendees chose to attend virtually, hundreds took a chance and made it down to Miami to enjoy the conference in person. Luckily CREFC is now well-versed in how to put on a virtual show, and those who were unable to attend in person were able to enjoy the panels from their office (or couch…or bed…).
As this was my first time attending this conference, I cannot say from experience how it was different than in years past, but I’m told it was a bit more subdued, way less crowded, and pleasant in that dinners and get-togethers were more intimate affairs where you were actually able to sit and have an extended chat with the people who we spent more time with in 2021 than our own families. Despite the cancellations of all official parties and receptions (barring the CREFC beach party, which was apparently a much more happening event than ever before), Dechert took advantage and treated our clients to dinners, drinks and even a cabana pool party. But not all was fun and games, as the saying goes, we were there for a purpose, and the conference this year did not disappoint.
Day one kicked us off with a discussion on the general state of the economy, which pre-COVID was in “extraordinary shape.” However, there is no denying that COVID took a toll, and while some may say that we were in a recession for much of 2020, our speaker proposed that what really happened was what he likes to call the “great cessation”—a period of time when the economy paused as quarantines and stay at home orders reigned. A key feature of this “great cessation” is that the recovery from this pause has been much faster than if we had experienced a true recession. This is good news for the economy ahead, but as we all know by this point, we are now faced with a real and uncertain future of inflation. Rising inflation and interest rates are on the horizon, there’s no doubt about it. The question we now face is what this means for this industry in particular. Despite the uncertainty about what the Fed will do and how high inflation will rise, our speaker still believes the economy is in a healthy place. Day one also gave us CREFC’s forum sessions, which included panels discussing issues related to multifamily, investment-grade bondholders, servicers, portfolio lenders, B-piece investors and issuers. The consensus was that multifamily is still the darling, self-storage looks great, hotels are making a comeback, office is still up in the air (with most thinking office in some form or another is here to stay), and retail is still iffy. Ending the day with the final session, in which our very own Stewart McQueen took part, attendees were able to hear what experts think the securitization market is up to next. The overall vibe from this panel, and generally throughout the day, was that we all deserve a big pat on the back for how the industry came together to handle COVID.
Day two started with a bang, with a diverse panel of industry veterans giving us their thoughts on the year ahead. I am happy to report that the general consensus is “optimistic” for 2022, with only one hold out expressing the oft-used “cautiously optimistic” from years past. Coming off a record year for both SASBs and CRE CLOs, these two products are expected to be the leaders of 2022 as well, with most participants predicting that 2022 will be an even bigger year than 2021, if you can believe it. We, here at Dechert, are acutely aware of the effects of the high demand for these products and it’s hard to believe we will be busier than we were last year. But given that this is probably the busiest January we’ve ever had, I’m inclined to agree with the industry on this and we should all prepare for the grueling (and yet, oh so lucrative) months ahead. We were also treated to panels on (1) diversity and inclusion, which discussed issues with finding and retaining diverse talent; (2) technology in the industry, which discussed standardization of information—the need for it and the challenges of getting it; and (3) perspectives from borrowers, which discussed property type demand, liquidity in the market and the transition from LIBOR to SOFR. Thoughts on LIBOR transition were a mixed-bag, with some panelists likening it to “Y2K” (i.e., a non-issue) and others still hesitant because they aren’t as familiar with the new benchmark.
The final day of the CREFC conference was quieter, as you might expect. Many attendees had packed up and left by Wednesday morning or may have been nursing the aftereffects of the previous evening, however the day three panels were worth the listen. Panelists discussed expected policies and perspectives from Washington in 2022, with the consensus that regulation is expected to become more aggressive in the year ahead, including as it relates to finance and real estate. And, in case you’re wondering, as the discussion turned to politics, the panelists predicted that the Republicans will win back the House in the mid-terms. Take that as you will. We also heard thoughts from Dechert’s own Stephanie Petosa on climate conscious capital and the impact that CRE has on climate change and greenhouse emissions. There was discussion about green bonds and ideas to expand private sector green issuance to conduits, as 2021 was a big year for green qualifying SASB issuance. While the U.S. market is not currently seeing better pricing or premiums for green bonds, the panelists predicted that this is expected to change as ESG mandates for capital sources continue to grow. And last but not least, day three brought us educational sessions, such as understanding the SASB market and negotiating tips, during which our esteemed colleague, Ella Smith, gave practical advice on “best-practice” for negotiating in any situation.
To sum it up, this attendee’s takeaways from the 2022 conference were (1) this industry and everyone in it did a fantastic job managing the disruption of COVID (yay, us!) and (2) hang on to your hats, CRE in 2022 is going to be bigger and better than last year! Can’t wait!