NYCB’s Issues ‘Manageable’ for CRE Market: MIPIM Panelists
By Nicholas Rizzi March 13, 2024 9:38 am
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Last year’s MIPIM conference happened against the backdrop of the failures of Silicon Valley Bank, Signature Bank and Credit Suisse.
History looked to be repeating itself recently as New York Community Bank teetered on the edge of collapse — with many worried that that could impact other regional banks — but some in France this year say they aren’t fretting too much about widespread bank failures.
“There’s a lot of headline news about real estate in the U.S. and bank exposure to that,” David Bouton, managing director and co-head of CMBS and real estate finance for Citi in North America, said Wednesday during MIPIM’s “Trend in U.S. Real Estate and Capital Markets” panel. “While there are issues, it’s very manageable.
“I think the overall consensus is that those are not systemic issues, those are very isolated issues,” Bouton added. “Whether there’s a bank failure, or even multiple bank failures, it won’t become systemic.”
And the panelists echoed the sentiment heard elsewhere in the convention halls of Cannes: News that U.S. interest rates won’t climb higher this year has the industry hopeful a recovery is on the way.
“It does feel like inflation is largely in check and the [Federal Reserve] has the ammunition it needs to certainly stop raising interest rates,” said Michael Lascher, a Blackstone (BX) senior managing director and global head of its real estate debt capital markets. “With that backdrop, we should start to see real estate values bottom out and hopefully be on our way to recovery.”
Panelists mentioned that the capital markets have started to open up — leading to more refinancings and deal flow — while private lenders have filled the void left by banks. And with some no longer fearing a recession, “certain folks are going to start to be a little more aggressive” in the market, said Bradley Weismiller, a managing partner of real estate capital markets for Brookfield Asset Management.
The asset classes where panelists expect activity this year include data centers, industrial, student housing, self-storage and retail.
Part of the appeal for retail for investors lately has been the thought that if the asset was still able to keep the lights on after the so-called “retail apocalypse” and forced shutdowns during COVID-19, it’s likely a good investment, Weismiller said.
“If the asset’s still there, that’s almost your credit writing there,” Weismiller said. “If it survived the COVID period, it’s most likely performing better than 2019.”
Office was considered to take the place of retail as the “four-letter word” in real estate, panelists said, and many have been eyeing multifamily as next in line.
While the stratospheric rent growth in the multifamily sector has likely plateaued, there can be some distress for deals that were benchmarked against that historic growth, said Kwasi Benneh, the head of commercial real estate lending in North America for Morgan Stanley (MS).
“A lot of multifamily traded hands underwriting those high growth rates,” Benneh said. “With interest rates gapping, I think multifamily has been the asset class that has been affected the most.”
However, Benneh said that it won’t be all bad for multifamily. The sector could never sustain that growth, so the market will now “normalize.”
Nicholas Rizzi can be reached at nrizzi@commercialobserver.com.
