December 16, 2016
By Dennis Kaiser
Five finance leaders shared the latest capital markets trends with the nearly 400 who gathered at Connect Westside LA 2106. The panel took a deep dive into 2017’s financial outlook to see where the capital stack is headed. They touched on debt, equity, CMBS, crowdfunding and beyond.
The big questions answered were how deals will get done, and what property types will thrive in the new year?
The good news is capital for CRE hasn’t dried up, nor has investor interest waned. The flip side is that there may be a bit of volatility in the coming months.
Here are the key takeaways from the wide-ranging conversation:
George Smith Partners’ Gary Tenzer says not “everybody is bullish” about CRE investing, as investors keep a close eye on the impact of new regulations, interest rates and the incoming presidential administration. He pointed out it didn’t help that HVCRE and Basel III rules “curtailed” bank lending activities in 2016. And, in the coming months he says, the market will need to “adjust to increased interest rates.”
CapitalSource’s Tom Whitesell says he sees some “loosening,” even though there was a slowdown, including CMBS shutting down for the first half of 2016. The “perception” of a less favorable environment ahead was likely “baked into the stock market,” and there is anticipation of “less regulation” under a Trump administration. He also believes lenders figured out how to navigate HVCRE. “It is a pretty good rule and we are able to work with it.” That said, he noted it may be a “volatile” first six months of 2017.
Deutsche Bank’s Mark Fluent points out that “smaller participants” may fall by the wayside as a result of the risk retention rules. Though it likely caused investors and originators to think and act like a principal versus a seller of a loan. “It forced discipline on investment people,” he says. One way that’s playing out today is that properties are being “stressed” to show what will happen under various scenarios. He says, the key factors affecting the markets now are two things: credit risk retention and increasing interest rates.
Acore Capital’s Kyle Jeffers says where opportunity may exist ahead are in “empty building or value add” situations. He notes the company thrives in volatile markets because when others stop lending they are able to “price for volatility and carry uncertainty.”
RealtyMogul.com’s Elizabeth Braman even noted the crowdfunding source did its first-ever online REIT that was open to unaccredited investors. Online investing is expected to experience growth, as people get more comfortable with the process and because there a much larger investor pool. And the $1,000 minimum threshold for investment is significantly lower, as well.
For comments, questions or concerns, please contact Dennis Kaiser