The Barry Slatt Mortgage team attended the Mortgage Bankers Association’s (MBA) Commercial Real Estate Finance Conference 2020 in San Diego (CREF), California earlier this week. Over the course of three days, we had more than 20 lenders meet with us back to back in our suite and had dozens of other meetings off-site. The following are our top takeaways from the annual event.
- The conference was buzzing with over 3,000 commercial real estate professionals in attendance. Lenders were flush with marketing dollars promoting their service with more parties to visit than time allowed. We continue to be surprised by the number of new bridge/mezz/debt fund lenders as well as established players that are flush with capital to invest.
- Total mortgage originations as tracked by the MBA in 2019 significantly exceeded the volume from 2018. Volume increased for all categories of lenders (Credit Union/Bank, Agency, Life Company, Debt Fund, and CMBS). Life Company lenders continue to be very focused on their mortgage banking correspondents because the larger shops are focused on bigger borrowers, larger loans, and more lucrative agency and higher-leverage capital transactions.
- There is a consensus that most major real estate markets throughout the country are healthy. The focus of many lenders remains in the top 50-75 MSAs but increased appetite for secondary markets near and around those primary markets is increasing. Lenders are taking a calculated increase in risk in exchange for a little more yield.
- The benchmark 10-year Treasury has dropped from last year to historic lows. Interest rates are predicted to stay low for the next few years. Many long-term lenders are constrained by floors that have come down but still remain a limiter vs the spread over the benchmark. Some of these lenders are seeking to add flexibility to maintain yield in the form of more flexible prepay or forward rate locks.
- The stability of the U.S. economy and political system continues to make it an attractive place for foreign investors to invest. There is concern about the upcoming election and how it might impact the 4th quarter so most lenders are very eager to get money out now to hit their annual allocation targets.
All segments of the commercial/multi-family real estate business (banks, CMBS, insurance companies, agency, and debt funds) remain extremely liquid. Allocations for most lenders in attendance have slightly increased from 2019 with almost all resource reporting that their investment returns in mortgages continue to outpace other investment categories within their institutions.