Current State of the Market
How is the commercial real estate market doing this year and where are we headed? Tom Fink, Senior Vice President and Managing Director, Trepp LLC, responded by saying, “All of the commercial debt markets are healthy.” He is amazed by the amount of foreign capital coming into the US with the dedicated purpose of making commercial real estate loans.
Also noted is the fact that the real estate industry has made a strong rebound since 2009 – it’s healthy, back on its feet and active. Rates continue to be at a historic low and there is still a huge amount of stimulus outstanding. Mr. Fink stated there doesn’t appear to be anything in the marketplace that is going to push rates higher in the near term. There’s a lot of money out there looking for good investments.
Aaron Kaiser: Hello, I'm Aaron Kaiser, partner at EisnerAmper and Co-Chair of our firm's Real Estate Practice. It's my pleasure today to introduce Tom Fink, Senior Vice President and managing director of Trepp LLC. Trepp was founded in 1979 and is the leading provider of information analytics and technology to the commercial mortgage backed securities, commercial real estate and banking markets. Welcome. Tom, what's the current state of the finance market, CMBS banking, etc. The dollar vibe with transactions rates. Where are we headed? How are the markets doing this year and the past quarter? Just what it into context.
Tom Fink: Well, Aaron, that's a lot of questions to answer all at one time. So, I think the first place to start is to say that all of the commercial debt markets are healthy.
I don't think there's a market out there that isn't finding activity and making loans, whether it's a bank which are very actively seeking commercial real estate, CMBS market, which is where we're most comfortable and we have a lot of information on insurance companies and lending. I think one of the things that continues to amaze me is the amount of foreign capital that's coming into the United States for the dedicated purpose of making commercial real estate loans. If you're in the market now for debt, if you've got a decent amount of equity in a property, I don't think it's hard to find the right debt for the right project at this point. In terms of the CMBS market volumes its seen, we're probably going to get close to $100 million of financing. If you think about it, back in 2009, just about five years ago, we were struggling to get $100, a billion dollars of financing done in a year, so I think it's safe to say the CMBS markets healthy. It's back on its feet and its active. He asked the question about where our rates, and rates are continuing to be at a historic low. I don't think there's anything in the marketplace that's going to push rates higher in the near term. We still have a huge amount of stimulus outstanding and I don't think that's going to allow rates to rise anytime soon. There's just a lot of money out there.
Aaron Kaiser: Thank you very much for your insights and thought leadership.
Tom Fink: Aaron, it was my pleasure. I always liked working with you and the folks at EisnerAmper.
Aaron Kaiser: Thank you so much. For more information, go to EisnerAmper.com.
What role are government-sponsored organizations playing in the real estate market today? Tom Fink stresses that government-sponsored agencies are still very important factors in today’s real estate marketplace.
What is the change in the level of non-performing debt and which way is the trend going? Tom Fink discusses the delinquency severity breakdown, saying “we’ve seen a real decline in the overall level of delinquencies in the market.”
How is the New York metropolitan real estate investment market doing? Tom Fink discusses the tri-state area commercial mortgage-backed security delinquency rates. It shows that New York State is outperforming its cohorts in NJ and PA.
Would a rise in interest rates affect the coming wall of maturities? Tom Fink states that if interest rates were to go up substantially that would provide an issue for the marketplace because of the uncertainty of the volatility.
In terms of safety and risk, what trends can be seen in the different lending classes? Tom Fink thinks credit standards have loosened over the last two to three years as more money becomes available and borrowers get better terms and conditions.
After discussing New York, Tom Fink discusses markets around the world from an equity perspective and how there's an awful lot of money is still available for pursuing equity investments in real estates around the globe in terms of debt.
The New York real estate market is doing relatively well. How is New York doing compared to the country as a whole? Tom Fink illustrates by showing the nation sectioned into regions and shows the delinquency rate in each region.
When asked about the important emerging technologies in the marketplace, Tom Fink replies, “I think we still have a long way to go before technology is really a factor in the commercial real estate market space. But, I think it’s still an exciting time”.
Tom Fink discusses the estimated upcoming commercial real estate debt maturities with annual maturities by lender type. The last 3 years have shown a continued erosion of the amount that’s due in 2016 and 2017 as people pre-pay loans.