Drew Fung

Describe the past 12 months in one word, then tell us the key lending opportunities you and your team have uncovered. 

Tricky. Despite a more positive mindset amongst lenders and borrowers regarding the direction of rates, as of this writing, rates remain elevated and somewhat volatile. Transaction levels are up and the debt capital markets are more liquid, but it remains difficult to peg values given the lack of comparable sales. So, with coverage levels challenged and the takeout financing more murky than usual, we have to underwrite with a lot of variables in flux which is tricky sometimes given all the moving pieces. We have had success providing capital to the property sectors where we have confidence in the long-term fundamentals, namely multifamily, industrial, and certain “alts” such as self-storage, student housing and build-to-rent.    

Are rate cuts the silver bullet the industry has been waiting for to solve all woes?

No, especially if we continue to have uncertainty as to the shorter-term mentality of the Fed and economic indicators they are using to make their decision. Instead of trying to predict the path of rates, we stay focused on longer-term, observable secular trends as opposed to purely cyclical ones. Based on our top-notch internal research, we lend in markets where we have confidence in job and population growth, as well as other factors particular to the multifamily and industrial asset classes. Innovation is a good example. Vast amounts of capital are being invested in AI, pharma and other knowledge-based industries, leading to pockets of specific submarkets projected to garner higher real GDP growth than other areas of the U.S. 

When Powell’s term is up, who should be the next Fed chair, and why? 

Personally, I am a big fan of Mohamed A. El-Erian’s views on the global economy and Fed policy. He is, in my view, a terrific combination of economic theory, global perspective, and practical application in investing given his past role as CEO and co-CIO of PIMCO and his current role as president of Queens’ College, Cambridge.  If you follow him at all, you’ll see that his views on Fed policies are well researched and supported by economic data and are well-respected within the broader financial industry. 

Tougher market: GFC or these past four years? 

The GFC was much worse in my view. There was a complete dearth of liquidity across all real estate, and it took a very long time for anyone to figure out how to get anything done. It was a pretty dour mentality for quite some time and required U.S. government intervention in the form of the Public-Private Investment Program to start the CRE lending market back up. Liquidity came back to the market much more quickly following the pandemic, and despite inflation and higher rates overall, the CRE lending markets remained open, albeit with much lower transaction volumes. But things are continuing to improve, and the market psychology reflects more optimism for 2025 and beyond.

Are you still as enthusiastic about multifamily as you were three years ago? 

Absolutely. Real estate lending is not a short-term trade, and successful mezzanine lending (or any lending, really) requires one to pay attention to both short- and long-term factors. Despite elevated new supply levels from 2022 to 2024, we expect rental demand to remain strong given the overall national housing shortage. In addition to the housing shortage, demographics and an acute for-sale housing affordability challenge support our continued enthusiasm for the multifamily sector in 2025 and beyond. 

Have you taken back any keys this year? Wanna talk about it?

We have not! I think this is testament to Clarion’s approach to lending, which involves input from many different groups, including our asset managers, equity acquisitions folks and, of course, research, in addition to the veteran lending team here, in order to approve a deal and keep proper watch over it in good times and bad. 

Lightning Round:

AI: Helpful or fad?

Unsettling.  If Elon Musk is concerned about it, should we all be worried?

Celebrity you’re sometimes compared to?

Obviously, Sean Connery.

Will interest rates be below or above 4 percent on July 1, 2025?

My guess is rates remain elevated longer than market consensus. How’s that for a political answer? 

How many days are you in the office today?

Four.

Pref equity or mezz?

Both can work well depending on the situation, but we prefer mezz!

Song title that encapsulates your current mindset?

“Patience” by Guns N’ Roses.

Dream dinner date?

My wife and I are obsessed with using our mini pizza oven and a cast-iron skillet to grill ribeye steaks at home.