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Nine Takeaways from Day Two of the MBA CREF Conference

Nine Takeaways from Day Two of the MBA CREF Conference

“Everybody feels safe and nice, so everyone is looking over their shoulder for what’s going to happen,” said one panel participant during day two of the MBA CREF / Multifamily Housing Convention & Expo 2017, which is taking place in San Diego. Here are some thoughts on what those changes may entail, from the discussions staking place at the show:

  1. CMBS originations volume is not likely to show a substantial increase in 2017 compared to 2016, according to Joseph Geoghan, managing director and head of origination with J.P. Morgan Chase. “It feels like it’s starting a little slow,” he noted, adding that he does not expect to see 2007 originations volume at any time in the foreseeable future.
  2. The shrinkage in the number of active CMBS shops has meant that it’s been more difficult for borrowers with smaller properties in tertiary markets to secure CMBS loans, said Dennis S. Bernard, president of Bernard Financial Group, a commercial mortgage banking firm.
  3. That being said, given the amount of ready capital in the market, there is no longer much worry about borrowers with loans coming due in 2017 being able to secure refinancing. As long as the property is in fairly decent shape, “Any loan that matures this year, there is capital to fill the gap,” said Steven Schwartz, managing director with investment management firm Torchlight Investors. “There is a lot of money waiting for that.”
  4. It is highly likely that Fannie Mae and Freddie Mac will be out of government conservatorship in five years’ time, according to both Michael D. Berman, principal with Michael Berman Consulting LLC, and Brian F. Stoffers, global president for debt and structured finance with CBRE Capital Markets. Berman expects that by the end of 2017, there will be legislative action on the issue, though it will take anywhere from five to seven years for the actual process to be completed.
  5. Whether the government will ultimately make any changes to the Dodd-Frank regulations is less certain, however, in Stoffers’ view. “I doubt [the repeal] is going to happen,” he said. “There are people on both sides that like” the added security the regulations create.
  6. President Trump’s new immigration policies are making the construction industry nervous. With already existing labor shortages in the sector and the promise of a large-scale infrastructure improvement plan, which will increase competition for skilled construction workers, construction company executives are wondering how they will fill on-site positions. “That’s going to be inflationary and it’s not clear where the labor is going to come from,” Berman said.
  7. While the importance of online sales has been exaggerated—they currently make up only 8.6 percent of all sales, according to Sarah Quinlan, senior vice president with MasterCard Advisors—retail property owners better get used to a new reality. Quinlan noted that in the aftermath of the Great Recession, Americans no longer value consumer goods as much as they once did, instead spending their discretionary dollars on travel and experiences. That shift, along with the drop-off in foreign tourism as a result of the stronger dollar, is what’s leading to the failure of multiple chain retailers in spite of a strong economy.
  8. When people are shopping for consumer goods, they are showing an increasing preference for small businesses, which may carry more items that are customized to their needs. Currently, 35 percent of all retail spending in the U.S. is going to small businesses, Quinlan noted.
  9. Having retail centers located in close proximity to where the target consumer lives or works is of outmost importance in today’s environment, she added. People are not longer willing to drive long distances to go shopping. “Things have changed permanently since the recession, and you must adopt your portfolios,” Quinlan said. 
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