LAS VEGAS-Core assets are still in demand and financing is there for them, but the financing question is open for secondary markets and lower-quality assets. Those were some of the conclusions of speakers at the California Mortgage Bankers Association’s 14th Annual Western States commercial real estate finance conference here this week. The event featured a series of presentations and panel discussions on all facets of commercial real estate lending, drawing lenders, mortgage brokers and allied professionals involved in the financing of commercial real estate.
In a session Thursday, moderator Kent Williams, a senior vice president and managing director at Marcus & Millichap, asked a panel of leading investment brokers to compare and contrast their perceptions of the investment environment now versus a year ago, focusing on buyer demand, availability of financing and other facets of investment sales. The panelists generally agreed that optimism was picking up and everyone was expecting a good year at the beginning of 2011, but expectations have been tempered by the events of recent months, including the slowing of economic growth and slower job growth than hoped for.
Nonetheless, demand for core assets remains high and financing is available, noted panelist Ryan Gallagher, a senior managing director in the Orange County office of HFF, although Gallagher also pointed out that investors have not achieved the rent growth that many had hoped for this year. When it comes time to refinance, Gallagher said, owners of core assets should find debt available, and some will be able to find CMBS debt because “there are certain assets that CMBS lends itself to.”
Panelist Ed Del Baccaro, a managing director with Grubb & Ellis in the San Francisco Bay Area, noted that GDP forecasts and job growth predictions have been trimmed from the more optimistic outlooks that many forecasters expressed earlier this year, but he added that some Bay Area submarkets are faring very well. “Silicon Valley is on fire,” Del Baccaro said, pointing out that unemployment there is in single digits compared with 12.5% statewide in California.
Jennifer Pierson, a national managing director in the Dallas office of the CBRE Private Capital Group, observed that the predictions for slow economic growth a year ago proved to be true and that the outlook remains the same in terms of the pace at which the recovery will proceed. “It’s going to be a slow climb, beginning in the second quarter of 2012,” she said.
The panelists agreed that multifamily is the property sector of choice for investors, with Del Baccaro pointing out that properties of 100 units and more are especially in demand among institutional investors. Pierson pointed out that investor demand and availability of financing can vary greatly within a sector. Large, well-leased retail centers can find financing much more readily than smaller centers, she explained, and single-tenant net-leased retail properties in general are “trading quite robustly.”
Thursday’s program also included a Western States Market Overview by economist Esmael Adibi of Chapman University and Mary Ludgin, director of global investment research at Heitman Captial Management Corp., as well as a keynote speech by pollster Scott Rasmussen of Rasmussen Reports and panel sessions on insurance company lending, permanent financing, and structured/interim financing, plus correspondent/lender meetings.
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