Last week, the CREFC Annual Conference was back in its traditional New York venue, which benefitted not only the Manhattan hospitality market’s RevPAR but also provided for an exciting and lively location in Times Square. Dechert’s bash on Monday evening was extremely well attended and the guests were treated to passed hors d’oeuvres and the
2018 CREFC January Conference – Plateau or Status Quo?
South Beach played host to the 2018 CREFC January Conference last week, as roughly 1,800 of our best friends in the CRE lending and securitization industry assembled in Miami to reflect on another year gone by and to muse about what’s in store (or out of store, in the case of retail) for 2018. In keeping with tradition, Dechert’s reception at the SLS Hotel was a hotbed of schmoozing, deal talk and employment fair, as over 400 guests took a break from discussing the SEC to… watch the SEC. The excitement of the Alabama-Georgia national championship game was a welcomed excuse to extend the party well beyond the official ending time (a move that is quickly becoming an expected budget buster for this annual event).
As usual, Dechert was well represented at the conference. Dechert’s Laura Swihart served as conference co-chair, and Rick Jones moderated a riveting (ok, not so riveting) panel on “Floating Rate Loans: Circa 2018”.
Conference panelists and attendees were generally bullish, and why wouldn’t they be after a 2017 that saw $95.3 billion in U.S. CMBS issuance (not including the GSEs). For color, that number is up more than 25% from 2016. Not a bad way to usher in the risk retention era.
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Single-Family Rental: The Landscape and Future of CRE’s Newest Asset Class
Earlier this month, our very own Kenneth D. Hackman, a regular contributor to Crunched Credit, moderated a panel entitled Single-Family Rental: The Landscape and Future of CRE’s Newest Asset Class, hosted by Dechert LLP, for CREFC’s After-Work Seminar Series.
The esteemed panel consisted of Kevin S. Dwyer, Senior Vice President, RMBS, Morningstar Credit Ratings, LLC; Bradley J. Hauger, Senior Vice President, Loan Servicing Director, PNC Real Estate/Midland Loan Services; J. Christopher Hoeffel, Chief Financial Officer, CoreVest American Finance and R. Christopher Jones, Director, Deutsche Bank.
Readers of Crunched Credit know that we are bullish on SFR: single-family rental is the largest class of rental stock in America, eclipsing the multi-family market. The number of single-family rental units grew 23% from 2006-2015, with most of that growth following the Great Recession. Since then, the institutional single-family rental business has blossomed into a viable, long-term business. And as institutional ownership has grown, SFR finance has grown apace.
You know, for a long time, we, and I think many other observers, thought that SFR was a trade created by the collapse of the residential housing market in 2007-2008. We thought when the opportunity to buy single family homes at ridiculously low prices, fix them up and rent them went away, the trade would go away. We were wrong and SFR is growing into a mature industry that is likely to continue to grow for many years. Right now, depending on who you ask, 12 or 13% of US housing stock is now single family home rentals. Of that, only a small percentage is in institutional hands. Note that in several G20 countries, a very large portion of the housing stock is in institutional hands. It seems there’s plenty of headroom for this industry to grow here at home.
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It’s Time to Bring Back the Square State Conduit: If We Build It, They Will Come.
What in the world have we done to ourselves? Our CRE Securitization business, or at least the conduit part of our business, continues to shrink: $800 billion in outstanding principal balance in 2007 and now, $400 billion? Maybe, right now, we’re at a run rate of $50 billion per year. Is that enough? Does that deliver critical mass? Are we a going concern?
Maybe.
As the business shrinks, the CMBS share of the Lehman Index (Bloomberg Index) continues to dwindle. That imperils liquidity and the diminishment of liquidity itself becomes yet another reason to abandon the sector. As that happens, some investors drop out, some “right size” their CMBS teams and as fewer analysts follow the space, the business again dwindles. Net/net, investors lose interest as there are fewer and fewer reasons to buy CMBS bonds. As the business gets smaller, less attention is paid by the mortgage banking community, fewer opportunities find their way to the CMBS window and other service providers are stressed. Wash, rinse and repeat until someone shuts off the lights and locks the door on the way out.
Okay, I’m overstating it a bit, but you get the idea. We’ve got a problem.Continue Reading It’s Time to Bring Back the Square State Conduit: If We Build It, They Will Come.
2017 CREFC Annual Conference: Into the Heart of the Swamp
CREFC held its Annual Conference last week in Washington D.C. Given the current politically charged climate, 2017 felt like a very appropriate time to move the Annual Conference from its traditional home in New York to Washington. Although attendance was down slightly from last year, over 1000 people attended the conference. Dechert hosted a reception on Monday at The Source restaurant for 250 friends and colleagues, where the excellent food and free flowing drinks lasted well beyond the official closing time.
The conference featured a number of new panels this year, including panels on the state of retail and the New York City real estate market. As usual, Dechert was well-represented in the panels and meetings. Dechert’s Dave Forti participated in a panel on “The Art of the Deal: Large Loan Challenges in 2017”, which discussed the current state of the large loan market and the challenges facing single-asset single-borrower (SASB) securitizations. One highlight of conference was the industry leaders’ round-table, which included Dechert’s Rick Jones and Laura Swihart, who closed out the roundtable in typical satirical, Washington fashion (Covfefe anyone?)
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Reading the Financial Tea Leaves: CREFC Market Outlook Survey 2017
CREFC has surveyed some of its attendees—all major participants in the commercial real estate finance industry—at the 2017 CRE Finance Council January Conference in Miami. CREFC’s 2017 market outlook survey confirmed what we observed at the conference this year, that for the most part survey respondents were cautiously optimistic in the face of the Trump Administration, Risk Retention and movement near the peak of the real estate cycle. We decided to dig a little deeper to see how this year’s survey responses differed from last year’s. Armed with the benefit of a little hindsight, let’s consider the year we had, the year we expected, and the year we’ve just begun.
Continue Reading Reading the Financial Tea Leaves: CREFC Market Outlook Survey 2017
What’s To Be Done about a Rule That Doesn’t Work?
Adding to the mountain of uncertainty for 2017 is how to interpret and implement (and…what is the fate of) the HVCRE (High Volatility Commercial Real Estate) regulations that came into effect January 1, 2015 (yup…that’s right…2 years and still no clarity) and which were implemented as part of the Basel III regulatory framework. So what
2017 CREFC January Conference – Primed for a Comeback
The 2017 CREFC January Conference, which took place last week at the Loews Miami Beach Hotel, provided an opportunity for those in the commercial real estate finance industry to reflect on an eventful 2016, and look ahead to 2017. Although attendance was down by almost 11% this year (we’ll blame Zika), around 1,600 people attended this year’s conference. The mood of the conference was generally upbeat, with most attendees expressing cautious optimism for 2017. As usual, the parties were lively, and 435 people attended Dechert’s reception at the SLS Hotel on Monday night to indulge in sushi surfboards and the national championship game.
While the panels, meetings and forums provided an opportunity to take the pulse of the industry, and we will get to 2017 and beyond shortly, we need to pause for a moment and look back at a year which may be an inflection point in our industry, our country, and possibly the world.
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A Trip Through the Labyrinth – The Regulatory Man in Full
And now to return to our commentary a few weeks back about the stultifying impact of ill-thought through rules and regulations (at best) (Brexit has intervened). This is our Regulatory State which broadly attempted to pick winners and losers and modify market behavior, to get an engineered outcome by using the blunderbuss of proscriptive rules and regulation.
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CREFC Annual Conference 2016: Headwinds or Head First Into the Wall?
The slow start to 2016 did not dampen the enthusiasm at CREFC’s Annual Conference, held last week in New York City. The conference saw record attendance, with standing-room-only crowds at virtually every panel. As with the Industry Leaders Conference in January, the hot topics on people’s minds were risk retention (and the rest of the regulatory headwinds), liquidity and the competitiveness of the CMBS market.
The conference made very clear that we are at an inflection point in the current cycle. The general mood of the conference, in our view, was the confluence of nervousness and cautious optimism. The gloominess of the first quarter, and fears over the “sky is falling,” has yielded to mild bouts of enthusiasm (at least if the parties were any indication). The capital markets have settled down over the past few months, spreads have tightened, and borrowers have begun to trickle back into the CMBS market.
Clearly our industry faces headwinds, and nobody is betting on a record second half, but we also did not hear anyone ringing the death knell for our business. We left the conference with more questions than answers. Here are some:Continue Reading CREFC Annual Conference 2016: Headwinds or Head First Into the Wall?