CHICAGO—There seems to be two major cautionary notes that are sounded every year in commercial real estate. One, of course, is the prediction of a coming wall of CMBS maturities. The second is that this will be the year interest rates will rise—no matter which year we're in. Debbie Riley responded to both with a resounding “so what?” in a wide-ranging interview just before the Federal Reserve was to hold its quarterly conference.

Indeed, GE Capital's senior managing director of North America capital markets sees very little in the mid-term that can derail the forward movement of the industry's upcycle. That includes not only the above-mentioned threats but also recent predictions of a downturn two years down the road.

“It's important to talk about the here and now and what's happening in the US economy, because, obviously, real estate is tightly geared to it,” Riley tells GlobeSt.com. “In the last job report we saw 295,000 jobs created, which was surprising because we're all aware of the severity of the weather conditions in the Northeast and Mid-Atlantic and the strike at the West Coast ports.” She points out that unemployment nationally is now at 5.5%. “It hasn't been that low since 2008.”

In addition, Riley says that while there hasn't been a strong uptick in wages, “When you look at real wages and take into consideration inflation, we've actually seen wage growth. Some of that is due to what's happening with oil, which is really good for the overall economy.”

With such positive news on the national economic front, it only stands to reason that the real estate industry is following along. In terms of deals, Riley points to increasing acquisitions in tandem with “fundamentals that continue to improve.”

In the capital markets, “Clearly there's more institutional money available and more coming in from pension funds and foreign investors,” she says. “On the debt side, banks and life companies are increasing their allocations to real estate. I see positive trends throughout.”

But does that optimism extend to such predictions as that were made in this year's edition of Emerging Trends, which tracked a movement toward “less rigorous” underwriting and an easing of lending standards? “I still see investors and lenders adhering to sound underwriting standards. I see it with mezz and senior investors, and I'm seeing it with CMBS B-piece buyers, who are showing tremendous discipline, either with kickouts or price adjustments. It's not 2006 or 2007.”

The GE Capital executive does predict that through 2017, we will have to deal with that flood of CMBS maturities, “something like $300 billion, which is two and half times what has matured over the past three years.” But even this long-dreaded event fails to derail the market's underlying strength.

“Several of these deals have already defeased,” she explains, “so people have been able to take advantage of the low interest rates, and the maturities will be much easier to absorb if rates stay low.”  She also cites strong property appreciation and market growth as further reinforcing our ability to absorb those maturities.

“At the end of the day real estate is asset by asset,” Riley says. “For larger properties it will really depend on whether the metrics are there in addition to the borrower's strength and the ability to bring in new capital if there's a shortfall. Keep in mind too that the CMBS market is growing, so while there will be those who have to go to special servicing if they can't be restructured, right now there seems to be more dollars than there are transactions.”

“The ratings agencies are also offering a lot of oversight,” she says. “We don't have CDOs, and we're using mezz for higher leverage. We're traunching on deals but nowhere near '06 or '07.”

Even balance sheet lenders, who might come in on spread, Riley says are keeping leverage “in check and staying pretty disciplined.” She is also tracking a rise in construction lending.

And even if interest rates rise, “We're talking about a zero interest-rate environment,” she points out. “The expectation is that there is going to be some type of increase this year, especially given what is happening in the stock and bond markets. But a 25- or 50-basis-point increase won't have a huge impact on financing because a lot of assets have really healthy coverage ratios.” 

So it was surprising to hear that she felt the general tone of the recent CREFC Conference was somewhat more subdued than last year. But Riley chalks that up to a number of factors: “On the CMBS side, people made a lot of money in 2013 and not as much in 2014. There was a lot more competition in 2014 and not as much volatility. It was still, however, an upbeat conference overall, especially for mezz investors and lenders. “There's a lot of new money coming into real estate, and allocations were up for balance sheet lender and life companies.”

We asked Riley where the smart money was going now and if she's seeing a lot of activity in secondary and tertiary markets. But most of her business has been in the primary and secondary spaces, the latter from investors willing to accept higher return thresholds and adjust to that timing. In terms of tertiary markets, “We see those deals getting done as part of portfolios, not so much in one-off transactions.”

The topic of conversation switched at that point to a focus on the opportunities for women in commercial real estate. What did not change was Riley's outlook. “I've been very fortunate in my career because I've had mentors and worked at companies such as GE that are very encouraging for women,” she explains. “There are more women in real estate today who can serve as mentors to help either men or women, which is very encouraging, and there are more leaders.” She believes this is a “great” business for women and men alike; on one level or another, everybody can relate to real estate, it is a very tangible asset.

And she does not believe that there are sectors of the business, whether its finance, brokerage, development or management, that are better suited for one sex over another. “The proper opportunities in real estate are related to the specifics of that position,” she concludes. “There is nothing in this business that is limiting because of gender.”