Commercial Real Estate Finance Conference 2017 – Takeaways

February 24, 2017

The Mortgage Banker Association of America held its 2017
Commercial Real Estate Finance Conference in San Diego this week. The following
are some of our important takeaways.

  1. The overall mood of the Commercial Real Estate Finance conference was positive.
    Lenders and mortgage bankers are projecting another good year for real estate
    markets in the U.S. for 2017. According to the MBA, “overall market strength is
    expected to continue with the MBA projecting that commercial/multi-family
    originations will increase slightly to $515 billion in 2017, from an estimated
    $502 billion in 2016.”
  2. Most life insurance company lenders have
    increased their allocations for 2017. They are all looking for high quality
    deals. One market leader estimated that allocations were up by 10% across the
    segment. Focus is on origination of long-term loans with lenders able to fix
    rates as far out as 30-years in some cases. Spreads are ranging from 135-250 over
    the comparable treasury rate.  Although
    forward loan commitments up to 9-12 months are available on case by case basis,
    the general theme was focused on more immediate funding (60-90-day)
  3. CMBS lenders were cautiously optimistic about
    production in 2017 as the banter and volatility caused by new risk retention
    rules seem to be behind them. There have been several successful
    securitizations this year with risk retention in place. With fewer sources
    originating in the CMBS space there is a better sense of transparency from the
    shops where the collateral is either a fit or it is not.  Not all CMBS shops are the same….
  4. Bank lenders seemed optimistic about production
    in 2017, but continue to face regulatory pressures. The common theme in the
    space is that there will be a continued pull back on construction and long term
    fixed rate financing beyond 7 years. Banks will re-focus their efforts on short
    to mid-term fixed, bridge and floating rate debt.
  5. Agency lenders are projecting a stable year as
    the market for apartments in most parts of the country is healthy.  Agency lenders are aggressively pushing their
    “Green” product.  There is also a push
    for floating rate product up to 7-10 years where in some cases leverage is
    higher than the fixed rate alternative.
    Long term fixed rates for 12-15 years are pricing very competitively and
    provide longer term options for borrowers with not a lot of additional cost
    over the 10-year option.
  6. Interest Rates should remain moderately low in
    2017, but will likely move up over the next few years. According to an article
    in Business News on Friday, 2/17, “Goldman expects U.S. mortgage rates to jump
    150 basis points by 2019”.
  7. The National economy is expected to remain
    healthy for the balance of 2017. Many commercial real estate finance executives expressed this same
    message at the conference.
  8. According to a report from MBA President and CEO
    David Stevens “… of all the potential changes from Capital Hill this year, none
    could have a more dramatic effect than tax reform legislation.” The industry is
    expecting major tax reform this year from the new Trump presidential