Top Takeaways: MBA CREF Conference 2023

The MBA’s CREF 2023 conference was held at the Manchester Grand Hyatt Hotel in San Diego. Energy levels were high, and the overall mood was positive despite a significant drawback in the second half of 2022. Slatt Capital brought our full production team and held 60+ lender meetings in our space. The following are our takeaways from the seminal commercial real estate finance event.

• Lenders are flush with cash and everyone’s volumes are down. Most lenders are still taking a conservative approach.
• Industrial and multifamily are still the darlings of the industry. Retail and self-storage are getting the green light, and there is increased interest in financing hotels.
• CBD office is banished to no-go land (unless heavy medical or very low leverage).
• Lenders are looking to get more creative in their process to get money out, with mixed success so far.
• Bridge and short-term financing demand dominates most loan requests
• Spreads remain elevated at 120-500 bps over US Treasuries or SOFR SWAPs on fixed-rate paper with most deals pricing in the 180-220 spread range over.
• Spreads on most bridge multifamily are in the SOFR plus 200-400 range depending on loan size, business plan, time to completion, risk, LTC/LTV, and going-in DSCR.
• Very few rates are available at sub-5 % coupons. Mid-5% is the norm though many rates are still averaging over 6%.
• Almost no one believes rates are going to fall this year.
• Borrowers are facing higher fixed expenses (such as insurance), so in particular markets or with certain property types (such as senior nursing care or CBD hotel assets), lower cash flows are affecting the overall debt coverages.  If a property is starting to face downward trends, lenders appreciate a borrower who approaches them early with a plan for weathering the storm, rather than relying on the lender to provide a workout.
• In lending on riskier properties like offices or hotels, sponsorship can go a long way as lenders are looking for entities that have demonstrated resiliency through market downturns and have shown they are willing to make capital contributions to the property to ensure reserves are in place (over partner distributions).
• Lenders rely on a variety of sources and have a high appetite for gaining data to monitor the health of their loans, including their own servicing data, which helps illustrate year-over-year (or quarterly) comparisons of property operations and highlights key leasing events, including subleasing details.
• It may be too early in the cycle to say whether maturity defaults can be expected, but identifying problems as early as possible to allow time for working through issues with the lender as a partner is key in mitigating risk for all involved.  There is plenty of liquidity in the market, so even more “stressed” assets should be able to get refinanced, but borrowers will have to adjust to higher interest rates.
• mPower Lunch with Nicole Provonchee:
  • More than 150 women and men attended the lunch.
  • Nicole’s message called for women needing to self-advocate and self-promote with confidence, rather than relying on their good work to speak for itself.
  • Creating a success list and identifying your “edge”—what makes you unique and valuable—are steps that women can take to help with self-promotion and gaining recognition for expertise in an industry historically dominated by men.