As published in Scotsman Guide's Commercial Edition, January 2012.
The CRE Finance Council (CREFC) is focused on representing the global commercial real estate finance industry and serves as a legislative and regulatory advocate. We talked with Stephen M. Renna, CEO of CREFC, to discuss where the commercial real estate market is headed and what regulatory and financial challenges he expects this year.
What are the legislative concerns of CREFC currently?
The first is what Congress is going to do with respect to the debt crisis and how they are going to meet their spending-cut mandate. There recently has been legislation introduced with respect to government-sponsored enterprises (GSEs). What you do with the GSEs is going to be important to the economy overall, but more specifically, Fannie Mae and Freddie Mac have multifamily programs, which — unlike the single-family programs — have been very profitable. Legislators need to understand that an important element of Fannie and Freddie is multifamily.
Are you concerned about Dodd-Frank risk-retention rules?
We believe in risk-taking in the market. As long as you’re informed, you should be allowed to take risks. We also don’t see the [premium cash capture reserve account] requirement as workable in any way and will be quite disruptive to the origination side of the [commercial mortgage-backed securities] sector.
Are loan modifications playing a role in this market?
You’re starting to see an increasing amount of loan portfolios getting worked out. We still have a lot of extensions being done, particularly by the banks, but it’s very institution-specific. Lenders have seen which loans were the ones that were going to hold their own and which ones have deteriorated to such a point that you say, “I’ve got to cut my losses on this one.”
Will Europe’s debt crisis affect U.S. commercial real estate?
Whenever you have a crisis, that’s where opportunity is born. There are a number of private-equity companies that are expecting European banks to start disgorging a lot of their commercial real estate mortgages because regulators want to get the banks out of the real estate market.
What opportunities do you see coming out of this market?
Balance-sheet lenders, particularly life-insurance companies, are doing well, and they expect to do well this year. The distressed market, too, has really been quite active, whether it’s providing rescue capital or workouts or special types of capital, taking over assets and repositioning — it’s starting to happen. The bottom line is: Real estate is going to be as healthy as its tenants and the underwriting on the financing.
Randall Woods was an editor at Scotsman Guide. For questions on this article, call (800) 297-6061 or email firstname.lastname@example.org.