MBA CREF 2022 Highlights

The MBA’s CREF 2022 conference was held in San Diego, California early this week. Back after a two-year hiatus, the conference was well attended, with approximately 2,500 registered attendees and many more non-registered participants. Energy levels were high, and the overall mood was positive after a successful 2021 and expectations for a similar 2022.

• The market overall is still extremely liquid and most active lenders (banks, insurance companies, CMBS lenders, debt funds, and GSEs) plan to lend at least as much in 2022 as they did in 2021. There were many new participants in attendance, which leads us to believe that there will be a lot of money in the CREF space this year.
• Even though Treasuries have moved up significantly this year, spreads have come down for most lenders. The net result of this movement is that “all in” borrowing rates have only gone up a little and are still at historic lows. Most lenders have significant liquidity and are looking for ways to invest in what they perceive as good loans.
• The recent volatility in the financial markets has caused CMBS spreads to go up. Most CMBS players are expecting this volatility to be short-term in nature.
• There are more active debt funds looking to place money in the structured loan space than we have ever seen. This level of liquidity has pushed interest rates down for this product type and has added liquidity in the market for assets for which it has been challenging to find aggressive terms in other markets.
• The insurance company space is very liquid. Additionally, many insurance companies are now representing investment funds and other lending sources that don’t have production capabilities to assist with the deployment of funds. The result is that many insurance companies have kicked off bridge and construction-to-perm programs.
• The bank segment is extremely liquid. Bank lenders are active in perm, bridge, construction, and structured finance at unprecedented levels.
• The GSE’s are active and prefer looking to lend on multi-family properties with affordable components. Terms aren’t as aggressive on multi-family properties without affordable components.
• An influx of small-balance commercial lenders—as many lenders are electing to increase allocations for commercial lending, they are having to make strategic decisions regarding staffing and their overall lending parameters. Many lenders, in lieu of increasing staff, are choosing to move out of the smaller loan space (under $10MM) and focus on doing larger loans instead of more loans. This transition by a number of players has created an opportunity for more small-balance lenders to enter the commercial real estate lending space somewhere between $5MM and $10MM, where historically there was a lot of competition.