CRE Securitization Navigates Credit, Transparency Issues
According to leaders in the securitized lending space at this week’s MBA CREF conference, SASB issuances “are the cleanest” but there is still a lack of transparency in the market.
SAN DIEGO—As investors are looking to take on the CRE CLO space, panelists during an MBA CREF breakout session this week say SASB “is the cleanest.” The reason, according to Erin Stafford, managing director and head of North American CMBA, is that they can do their due diligence and really dig in and do the real estate analysis with SASB.
“The challenge that still remains, though, is the transparency of the market,” said Stafford. “In the CRE CLO space, because these are replenishing pools, there is a challenge to get information.”
She explained that while it is clear that investors do see the great performance and the great volume in that arena, in order to “go down and risk, you have to be more transparent and give them more information.”
In general, the migration in credit quality is also holding up across sectors, Stafford said. “Where we are seeing push is if you look at the CRE CLOs and look at what type of upside people are projecting, it is starting to get a little thin,” she said. “But otherwise, things are holding up well from a credit standpoint.”
Fundamentals are strong across the board for multifamily, she added. “We continue to have a negative view on suburban office and will still have a challenge. We are seeing some increased vacancy in office. Retail isn’t all bad, but it just gets a bad headline.”
She noted that the regional malls are being flushed through, but said that they were bad before Covid. “Covid kicked them and they are working through the system, but new things aren’t popping up.”
Part of the problem with the regional malls, according to Jan Sternin, SVP and managing director in the New York office of Berkadia, is that “we didn’t know how to repurpose them. That was part of the problem…you’ve got to have a plan.”
According to panelist Quentin Fogan, managing director of CMBS origination at Bank of America, fundamentals for the CRE lending space by and large through Covid did better than expected. “Broadly speaking,” he said, “multifamily and industrial outperformed.”
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