Commercial Real Estate Finance Conference 2017 – Takeaways
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.
- 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.”
- 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)
- 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….
- 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.
- 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.
- 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”.
- 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.
- 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