Key Takeaways from MBA CREF ’24

Key Takeaways from MBA CREF ’24

The MBA CREF Conference took place last week in San Diego and our producers were present to meet with dozens of lenders, primarily our correspondent life insurance company lenders. Below are our top takeaways from this conference:

  • To begin 2024, we’re seeing an overall improvement in lender sentiment and an eagerness to get money out the door, following a year where many lenders fell short of their production goals. There is a clear surge in optimism this year in the lending community. Many lenders are hopeful that transaction volume will pick up and that they will meet or exceed loan production goals.
  • Although negative headlines surrounding office assets have made financing tricky, we are finding several lenders interested in providing capital for the right deal. In general, suburban office properties with a granular rent roll and strong operating history, including leasing momentum post-COVID, are still attractive to many lenders. Pricing will be at a premium to other asset classes, and we have seen spreads range from 205-280 bps with leverage typically capped at 50% LTV.
  • Our Life Cos are in a great place and hungry to make up for what they missed out on last year while production was down. The lowest current spread we heard of was 135 over the corresponding Treasury, while the majority of our lenders were in the 170-195 range. This is still far inside of what most other lenders can offer.
  • Lenders would still consider compressing spreads to win the right deal. Many are introducing new or improved terms in addition to spread decreases. One of our lenders can now offer a 30-year amortization on all property types, which is uncommon. Another is getting into construction lending.
  • Very few banks attended, and the market is still too turbulent for many other capital sources. Our Life Companies are the best-positioned sources for a market like the one we currently find ourselves in.
  • We were surprised at how tight CMBS spreads have been over the last few months for lower-leverage CMBS transactions. We’re seeing mid-100s for moderately leveraged multi-family and self-storage properties, which are competitive with agencies, life companies, and others if borrowers are okay with the CMBS structure.
  • Our most sophisticated lenders have continued their stance that rates will not come down anytime soon. Potentially by the end of the year, but they’re not too optimistic on that front.
  • There is plenty of capital to deploy after a rather soft 2023. While borrowers are waiting for rates to come down, the general outlook from economists is that the 10-year Treasury will hold steady in the 3.50-4.50 range for the foreseeable future. The borrowers that have a deal ready to go and can take advantage of the drops in the treasury will lock in the best interest rates.
  • A continuing focus area for lenders is sponsor/borrower experience, track record, and financial strength. Lenders are hyper-focused on experienced owners with strong liquidity to get through the interest rate volatility and the steep operating expense increases we’re seeing for insurance premiums, utilities, property taxes, materials, labor, etc.

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