Key Takeaways from the MBA CREF Conference 2022

Key Takeaways from the MBA CREF Conference 2022

By Grady SeldinJacob Lee |  February 17, 2022

For the first time in two years, the MBA CREF Conference took place in person in San Diego earlier this week. While a handful of companies were absent due to covid concerns, the overall attendance was phenomenal as everyone in the commercial real estate finance world longed for an in-person event to share their successes in 2021 and production goals for 2022. Amid a rising rate environment, inflation, and several global situations, the conference was well-timed to strategize with our lenders for 2022.

PSRS met with dozens of lenders, primarily our correspondent life insurance company lenders, and want to share the below key takeaways from the conference.

2021 records lead to 2022 production increases

The overwhelming majority of life insurance companies exceeded their production goals for 2021 given the economic recovery post-2020 and historically low-interest rates. Given this success, credit committees approved increased allocations and production goals for 2022. To achieve this increase in production, several lenders are increasing their minimum loan amounts and are willing to take on retail deals that were on pause given the pandemic.

“Beds and Sheds”

Multifamily and industrial (“beds and sheds”) continue to be the gold standard for all lenders as these two asset classes made up on average 75-90% of production in 2021. Insurance companies are becoming more aggressive and more creative in their underwriting and structure to compete with the rest of the lending market to win these deals. This includes tight debt yields, interest-only periods, the ability for fixed-rate deals from 3-30 years, acceptance of minor leasing and rollover risk, and tighter spreads, among other factors. Owners of these assets are in a great place from a financing standpoint as insurance companies look to repeat this trend for 2022.

The Retail Resurgence

Retail made a strong comeback at the end of 2021 as the effects of the pandemic and headline risks dissipated. While 2020 and 2021 were purely grocery-anchored focused, insurance companies are back to lending on urban infill strip centers, neighborhood centers, pad buildings, etc. As consumer spending has reached pre-pandemic levels, and in some measures even passed them, insurance companies see increased retail financing as a large driver to achieve their lofty production goals in 2022. Assets with experienced sponsors who survived the pandemic, urban infill locations with demand drivers, internet resistant tenant base, and significant lease term remaining on the larger tenants, will attract attention from several insurance companies.

Interest Rate Volatility

The lowest spread we heard from insurance companies was 105bps for incredibly low leverage multifamily and industrial with credit tenant leases. Most insurance companies are in the 140-170bps range over the US treasury as of today. Everyone is aware of the recent uptick in the treasuries but that isn’t the only benchmark insurance companies use for their spreads, the other is the corporate bond market. As the yield for investment-grade bonds widens, insurance companies will adjust their spreads accordingly for commercial mortgages as they analyze alternative investments. As such, we will continue to monitor these trends closely and keep our clients up to date in real-time.

Feel free to reach out to us with any questions or with any opportunities that you would like to discuss with us!



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