By Fred Matera, CIO, Redwood Trust A lack of affordability will lead to near-term weakness,…
This week, CoreVest headed to CREFC Miami for our first conference of the year. CREFC is the trade association for the commercial real estate finance industry. Many recognized finance leaders gather here each year to discuss the most relevant topics facing the industry. CoreVest President, Christopher Hoeffel, spoke on the panel, “There’s No Place Like Home: Multifamily and Housing Trends and Outlook”. While CoreVest Vice President, Leah Goldmintz, spoke on a panel for CREFC Young Professionals.
Below are some key takeaways from Leah and Matthew Orrino, Senior Vice President at CoreVest, as they attended and interacted with others at CREFC Miami.
1. Goodbye LIBOR, Hello SOFR!
While we know that LIBOR was phased out in the US at the end of 2021, the question remains – what will replace it? Will it be Term SOFR? Compounding SOFR? Or the J-Curve? Everyone is ready to commit to one, but no one seems to want to lead the market to a decision. However, SOFR seems to be the foremost replacement for LIBOR in the US and keeping an eye on the situation will certainly be important as 2022 kicks off.
2. How will CMBS make a Comeback?
Although CMBS loans have been around decades, both SASB and CRE-CLO’s saw a record issuance in 2021 while the volume CMBS loans issued declined. So, how does CMBS turn around its declining conduit issuance? Perhaps lender flexibility during the Pandemic has shown borrowers that CMBS can be user friendly. This could, in turn, boost its number of issuances in the coming year as borrowers realize the value of a CMBS. As investors start of the year strong, we can more accurately predict the performance of CMBS loan issuance in 2022.
3. Multifamily Assets may not Remain the Darling of the Industry in 2022.
Multifamily assets have proven to be a favorite of the industry in the past; however, as capitalization rates have compressed across the entire sector, it is questionable whether their status as the darling of the industry will remain. Perhaps continuously raising rents will continue to buoy the market. Nonetheless, a new product type, such as industrial or self-storage, could be poised to take the place of multifamily assets as the favorite. These other kinds of properties may be important for investors to consider pursuing as prices and preferences shift with the new year.
4. Rising Interest Rates are not the Macroeconomic Change the Industry is Watching.
Predictions of increasing interest rates in 2022 have become a cause for concern for many. However, the consensus is that the Federal Reserve’s tapering of quantitative easing is sure to influence the industry through this resulting economic stimulation and combat high interest rates.
5. The Securitization Market is Seeking More Transparency.
The constantly evolving nature of the CLO market leads rating agencies, investors and B-Piece buyers alike to request increasingly more information. Going forward, innovative use of technology and standardized reporting packages can help provide the additional information needed to make informed decisions and ensure transparency.
We would like to thank Matt and Leah for their insight and preparing these helpful takeaways, as well as the organizers of CREFC for inviting Chris and Leah to speak. One conference is in the books and many more to go. We look forward to a full year of events and connecting with real estate investors and mortgage professionals across the nation.