What keeps you up at night? What is the biggest challenge facing small to mid-size commercial/multi-family lenders in California?
As the CEO of Barry Slatt Mortgage, I must be conscious of both market and operational risks. I am not experiencing “sleepless nights” about either of these big picture risks right now, but feel that both warrant further explanation.
In both the loan and real estate markets, there will always be risk. The market for commercial and multi-family loans is extraordinarily liquid right now. All major lending segments (CMBS, Life Insurance Company, Bank, Agency, and Private/Fund) are actively making loans. This is a phenomenon that in my 25-year career has not always been the case. It is unusual for all markets to be healthy and active simultaneously as they currently are. Additionally, long-term interest rates continue to remain low and the major real estate markets in the county where we operate are strong. These healthy trends contribute to me sleeping well at night.
Operational risks that we are most concerned about include the rising cost of health care (and other overhead costs), recruiting and grooming the next generation of mortgage bankers/servicing professionals, increasing complexity and compliance driven by auditors, regulators, and clients, and keeping current with technology. Being small and nimble is also important to us so navigating multiple operational priorities while getting things done well are issues that our management team navigates through on a regular basis. Fortunately, we have a strong team of senior level managers at Barry Slatt Mortgage that work together to make sure we can overcome operational risks as they arrive.
Which market sector – office, hospitality, industrial, multi-family – is the hottest now, and which will be the most active in 2019?
At Barry Slatt Mortgage, we finance all major property types. Two years ago, we made a strategic effort to increase production in the multi-family sector. Today with many investors focusing on multi-family properties as their favorite asset class, it is essential to understand where multi-family properties fit in today’s dynamic capital markets. Additionally, most lender types are trying to increase allocation to high-quality multi-family loans. According to a 6/28/18 article written by MBA’s Jamie Woodall, “The level of commercial/multi-family mortgage debt outstanding increased by $44.3 billion in the first quarter of 2018 as all four major investor groups increased their holdings.”
Given the positive investor sentiment and high-level of liquidity in the market, we believe the multi-family space will continue to be hot in 2019 but we still expect to do a tremendous amount of work in the office, industrial, hospitality and retail sectors.
How is your company (and how should the industry more broadly) work to encourage the development of the next generation of originators and leaders?
The next generation of mortgage bankers is VERY important to us at Barry Slatt Mortgage. These future originators and leaders are vitally important to the success of our organization especially in the area of innovation and technology planning. We have found that our industry broadly is not attracting the young talent like it did many years ago and it is vitally important to all of us to focus on this issue and is a recurring theme at most industry conferences that we attend.
We have created a group of young leaders within our company that formally meets and advises our management team on issues that are important to them and other important topics related to technology, culture, marketing, and operations. We have generated a lot of great ideas through this advisory group and it has assisted in keeping many of our young leaders engaged in the firm’s growth and direction. We have also found that the next generation of mortgage bankers within our organization have created a fantastic amount of energy and excitement that transcends through our entire company.