Kellogg Home
Aug 24, 2019

Posted on
Jun 29 2016

The Kellogg Real Estate Conference and Venture Competition included a capital markets panel of industry experts: Cia Buckley Marakovits (Dune Real Estate Partners), Mark Myers (Wells Fargo), and Michael Nash (Blackstone). The capital markets panel was moderated by Jeffrey Horowitz (Bank of America).

The panelists agreed that the heightened regulatory environment has reduced overall liquidity. Lending decreased at the beginning of 2016 due to tighter underwriting standards. Higher-risk transactions, such as new construction, have been more difficult to finance. At the same time, some considered that it was the price American companies, investors, and banks had to pay in order to have access to the cheapest source of capital in the world. One concern was how the regional banks will react to the regulatory environment in terms of loans they make: they may not have as much appetite or scale to continue to make the same level of loans as before.

Temporary problems may result from Federal Reserve tightening, reduced bond liquidity, renewed growth scares in China or geopolitics, but behind these is an underlying picture of ongoing expansion. The global economy is neither approaching capacity limits nor facing reduced demand (except for commodities and energy), banking systems are healthy and debt levels seem more reasonable. Rapid growth seems unlikely, given aging populations (besides Africa and India) and sharing economy technologies that do not generate much Gross Domestic Product, but sensibly priced assets do not need a booming economy to generate reasonable returns.

CMBS issuance is projected to be half of what it was in 2015. While there is risk aversion due to global uncertainty, and caution about record low cap rates, the life companies and banks are becoming more active, which might make up for some of the CMBS decline.

About the Author

This article was written by Denise Akason.