California MBA Western States Commercial Real Estate Finance Takeaways
The following are Barry Slatt Mortgage Company’s primary takeaways from last week’s California Mortgage Bankers Association Western States Commercial Real Estate Finance (CREF) conference in Las Vegas, Nevada.
- All segments of the lending market are active and seeking more business. We are in an extremely liquid market. The different lending segments (life insurance companies, CMBS, banks, agency, and private funds) appear to be meeting their annual loan origination goals for 2018 and all have room for more business.
- The focus of the conference was west coast financing. Most major real estate markets on the west coast are viewed as healthy and desirable. In many cases life company lenders specifically identified major gateway cities of CA, WA, and OR as targeted expansion markets.
- With short-term interest rates on the rise and a flat treasury yield curve, long-term fixed rates look very attractive. The additional cost to fix rates out beyond 10-years is minimal. In some cases, there is only a 10-basis point differential between a 10-year and 20-year fixed rate loan. Additionally, 6-12-month forward rate locks are being offered by many life insurance company lenders and some banks to assist borrowers to secure low rates in advance of any material rise in overall rates. Most lenders expect rates to increase gradually over the next 12 months.
- Bridge lenders are plentiful. Historically mortgage funds, private lenders and banks have dominated the bridge loan space. Now, there are several life insurance companies that have entered the bridge loan space to help fuel their permanent loan business.
- Many lenders, although having stated we may be late in the cycle, still feel that their consistent and conservative approach to underwriting in the current market remains strong. Therefore, many do not see any major cause for concern, outside any unforeseeable event, that should slow the current state of the lending market.