Commercial Real Estate Loan Rates 2016

At the beginning of the following months, the CREFC hosted its "Commercial Real Estate Finance Summit - West" in Santa Monica, CA, which, although not nearly as large as the New York meeting, was very well frequented (around 175 participants, an improvement on the previous year). In view of the mood at the beginning of this year in Miami, the fluctuations in spread rates in recent months and the fact that many in the sector (now undeniably) have made a sluggish start to 2016, the two themes of the summit should not come as a surprise: limiting risks and the state of the markets.

Regardless of the subject mentioned, most panel discussions (and some conversations) quickly developed into a debate on these two topics (albeit from different perspectives). Everybody seems to be in agreement that real estate fundamental data is not really the cause of instability in the markets (at least not yet...).

It is not the whole year 2006: loan-to-value spreads are more consistent, CMBS is trying to concentrate more on key market areas, B-piece purchasers are exercising more oversight than ever, and amortisation is a more consistent characteristic of securitised lending. Although the real estate base now looks good, were some panellists concerned about what would come to pass if jobless rates fell and desk space did not grow as rapidly as before?

_GO ( and hedging risks and the state of the market...): If CMBS returns to what it (historically) does best: competition for prices and security of delivery (a panellist proposed that interest rates should fall to around 4). Retaining risks (and the state of the market...): (Or, more precisely, after the day of work, given the actual reality of actual lending, the launch and closure of securitisations...)

Bill buyer seemed to think that tying up risks horizontally is what the current trends in the markets (in the long run) will be, and that it will look very much like the processes emitters and bill buyer are going through now, it will simply be more expensive. You are working to raise earmarked money to purchase these stripes and keep them for the entire 5 years (at least; and probably longer).

Big bench emitters, on the other side, seemed to believe that vertically conserving risks would prevail at the end of the workday. Theoretically, cross-cutting limiting seems to be a good idea, but they fear that it will become too costly. And no one has become quite familiar with the "commitment risk" associated with the sale of these horizontally striped products (the major financial institutions do not want regulatory authorities to knock on their door - 3 or 4 years after the event - just because a purchaser they have never checked is making an inappropriate hedge).

Some other things that everyone seemed to be agreed on included the need for pricing on what the purchasers of B-pieces will actually be charging for the storage of the vertical hazard strip es; and that (as a convenience ) preserving risks would probably not really make writing more consistent.

A number of panellists also noted that until such time as the financial community agrees on the most effective way to eliminate risks, we all expect even more instability as lenders begin to try to incorporate their expected strategy to eliminate risks into the conditions they offerorrowers. At a ( somewhat) more positive level, there also seemed to be some consensus that although preserving risks would hurt everyone in the shortterm, it would be good for the long run.

Over the long term, a number of discussion participants seemed to be in agreement that willingness to take risks could eventually lead to a smaller size but, because it was smaller, it would also be a more healthy one.