MBA CREF ‘22: Valentine’s Day Comes With Some Fighting Talk

It’s once again a borrower’s market and lending competition is fully back, baby. Record transaction volumes are being surpassed left and right, and lenders came to win borrowers’ hearts, and term sheets. 

One of the first panels of the day — moderated by Daniel Mullinger, executive vice president at PNC Real Estate—  discussed that very topic. 

“Pipelines going into 2022 are as strong as they were in 2021,” said Paige Serden, a senior director at Gantry. “The level of activity in smaller, regional banks is also surprising, they’re being really aggressive, especially in multifamily, and are bidding on a non-recourse basis.” 

Indeed, multifamily and industrial remain the belles of the asset class ball, but “competition is pretty extreme, and there’s only so much industrial and multifamily out there,” Chris Neiderpruem, head of real estate finance at CIT, said. “You have to open the funnel a little bit and take your blinders off.” 

Neiderpruem said he now sees senior lenders feeling a little more comfortable with the property types that were in nobody’s heart the past two years — such as retail, office and certain hotels, including limited-service and drive-to-resort assets. 

If you are chasing down a multifamily deal today, go easy on those aggressive rent growth projections when underwriting deals, panelists warned. “Assuming a 40 percent rent growth is probably a bad idea, guys,” Rebecca Cox, Truist’s Northeast market manager for national real estate, said.

(Commercial Observer won’t reveal the identity of the attendee sitting behind us who whispered to his colleague: “Why?!”) 

Cox said that her clients are busy diversifying their ask today in a bid to chase yield, and expanding their portfolios to include single-family rentals, life sciences properties and retail. 

“We’re seeing lots of borrowers going into new markets to chase yield or expanding in the market in which they operate,” Serden concurred. 

Some borrowers are also cheekily pushing loan terms, panelists said, with requests for fewer covenants and longer, interest-only periods on loans. “But just because you ask, doesn’t mean you get it,” Niederpruem said. 

You tell ‘em, Chris. 

With 2022 shaping up to be just as busy as 2021, one concern several panelists brought up was the lack of human capital, and the great resignation. “We’re looking for talent every day and it’s getting harder,” Cox said.  

Neiderpruem agreed, saying he’s seen a lot of turnover in mid- to junior-level staff. He attributed the issue partly to the pandemic forcing employees to work from home and be separated from their colleagues, as well as their workplace culture. 

Andrea Wagonseller, Vice President of CRE finance at M&T Bank (MTB) had concerns about the expiration of the 421-a tax incentive program in New York, which she described as “huge for our clients. It’s not viable to build market-rate rental properties without 421-a, and the real estate industry is looking to see what the government and [the Real Estate Board of New York] comes up with.”

When the conversation swung to environmental, social and governance, or ESG, the panelists each addressed their individual firm’s initiatives, with Wagonseller emphasizing the importance of ensuring ESG initiatives are actually making a difference and not being done just to satisfy regulators. With regard to diversity, equity and inclusion, aka DEI, she spoke about M&T’s recent announcement that it would provide $43 billion in loans, investments and other financial support to create greater economic opportunity for low- to-moderate-income families and neighborhoods as well as people and communities of color. 

On a more personal level, “I think it’s pretty cool that 75 percent of our panel is female today,” she said. 

We agree!