Recap of the Zoom-In Webinar: Commercial Real Estate Debt Markets
NAIOP SFBA hosted Commercial Real Estate Debt Markets as its weekly Zoom-in webinar on Thursday, February 11th. The program featured Jordan Angel, Managing Director, JLL Capital Markets in a rare candid conversation with a three of the top commercial real estate lenders who are all active players in the Bay Area. Panelists including Eric Cohen, Principal of Square Mile Capital, John Lippmann, Head of Structured Debt at New York Life Investors and Cynthia Wilusz Lovell, Executive Vice President at Wells Fargo.
Within the intimate context of the webinar, the panelists spoke openly about their experiences during 2020 and provided their insights about 2021 and beyond. Due to the confidential nature of the information exchanged we are unable to share the specifics of their remarks. However, we have compiled a general overview of the discussion.
2020
- First half substantially down across the board
- Focused on existing clients and modifications
- Transaction volume low
- Debt Funds and Life Co’s ended the year strong with capital beginning to flow
January 2021
- Saw significant uptick in activity
- Banks getting more on the offense
Market sectors
- Strong focus on industrial, multifamily and life sciences
- Resulting in dramatic increase in spreads
- Muted optimism about the office market
- Actively quoting with right sponsors, credit quality and product
- Still bullish on San Francisco and transit oriented suburban locations in the long run
- Conservative approach of large companies to return to office may mean short term boost for suburban locations
Bridge and Construction Loans
- Biggest difference – not seeing many office deals
- Reports of some Bay Area multifamily projects not meeting underwriting on rents
- Super competitive bridge market
- Sponsorship especially important on construction loans / more established sponsors
- Senior part of capital stack with recourse very efficient now with banks coming back into market / some sponsors comfortable putting up balance sheet for more competitive pricing
- Plenty of liquidity for quality deals / the best ones aggressively bid
Allocation of Capital to the Bay Area
- Panelists continue to be long term believers in the Bay Area with deep roots here
- Believe core markets including the Bay Area will continue to be strong
- Bay area’s submarket’s reacting to challenging times in different ways
Impediments to Deploying Capital
- Amount of liquidity that needs to be deployed / leading to feeding frenzy
- Challenge to stay disciplined and also competitive
- Today’s spreads still wide versus a year ago, however getting close
- Reduced number of transactions
- Retail, hotel and office facing headwinds
- Exercising restraint in evaluating industrial and multifamily deals
Advice for young professionals
- Look for deals that are in trouble then dig in and be part of the solution / that is where you learn the most
- There is always something that unforeseen / remember how it felt just before Covid hit when the market was so aggressive, and you thought nothing could go wrong
- Say “Yes” to people you trust - working on a troubled deal or a new deal / have the courage to jump in
