Real estate pros share their views on slowdown

As we await the NYS budget reveal to understand how real estate will be supported (or not) by the New York legislators, the air is uncertain. For today, I’ve gathered some recent comments made by industry executives at an annual Commercial Observer conference. The focus is on CRE at the national level, a very important influencer on the state of CRE in NY.

Office environment:

“…Some of these buildings are going to go down … from a lender perspective, be prepared [in your office exposure] that you’re probably going to own that for a while.” – Grant Frankel Managing Director at Eastdil Secured.

Translation: Banks will become office landlords, and offices will be undesirable for a while.

“… We’re headed into a pretty rocky time for office investment.” – Onay Payne Managing Director of Real Estate at Lafayette Square.

Translation: Offices buildings will see significant losses in value in the coming years, as a result of remote-first policies.

“The epicenter of this problem might be antiquated office, but the tremor is going to be felt by every asset class, everywhere in the world” – Ralph Rosenberg, Global Head of KKR Real Estate.

Translation: High interest rates and reduced lending by regional lenders could mean market turbulence for many parties, not just distressed office lenders and owners.

Restructuring:

“If the sponsor has his or her own money to put into the deal, there’s a higher probability to get the restructuring done” - Rob Verrone, Principal at Iron Hound.

Translation: Sponsors with experience and relationships will be more likely to succeed at restructuring their debts.

“…There just needs to be a reset, and that reset occurs when people are forced to transact, not when they want to transact.” - Jonathan Roth, Co-Founder and Managing Partner at 3650 REIT.

Translation: There will be some distressed sales and this will help re-balance the market.

“All sides of the transaction have to understand where we are in order for transactions to take place.” – Tony Fineman, Co-Head of Mortgages Originations at ACORE Capital.

Translation: Transactions are slower now. For them to pick up speed, sellers, buyers, and lenders need to adjust.

Future outlook:

“I think we’ll need some price stability or at least some conviction around where rates are and the economic outlook, etc., to bring people back to the table.” - Lauren Hochfelder, Co-CEO of Morgan Stanley Real Estate Investing.

Translation: Market players need some clear signals as to where the market is going to encourage them to perform transactions.

“…If we get back to a more stable environment with a more dovish policy,” he said. “That’s going to help tremendously.” Drew Fung, Managing Director of Debt Investment at Clarion Partners.

Translation: Things will improve once the Fed begins to cut interest rates.

“… We are active, and most groups out there doing multifamily lending are finding opportunities, borrowers are looking to borrow…The areas that we’re seeing most activity are in construction loans that are maturing, and when someone wants a TCO (total cost of ownership) bridge loan where they want to be 20 percent occupied.” - Mark Silverstein, Senior Managing Director, Proprietary Products NewPoint Real Estate Capital.

Translation: The multifamily sector, though slower, is seeing healthy transaction activity for those who seek it out.

Sources: Commercial Observer, The Real Deal