Forum Spotlight: Portfolio Lenders
December 10, 2024
Robert Grudzinski and Kevin Pivnick (Forum chairs), Melissa Farrell and Kristin Khanna (chair-elects), and Scott Dixon and Chris Miculis (past-chairs) form the Leadership Working Group for CREFC’s Portfolio Lenders Forum. This working group sets agendas and priorities for the Forum and represents the constituency on CREFC’s Policy Committee.
Why it matters: Each industry Forum addresses issues critical to their business sector and works to achieve solutions that serve a common purpose.
CREFC works closely with Forum leaders and members to:
- Ensure all voices are heard,
- Assist in finding consensus amidst disparate and converging views,
- Sharing those views when appropriate with regulators and legislators, utilizing CREFC’s experienced Government Relations Team, and
- Develop new best practices and monitor existing ones.
Key Portfolio Lender Focus Areas
Valuation and Rates:
- Declines in valuations and loan risk ratings have moderated over the last few quarters.
- Overall transaction volume remains muted.
- While the Fed has cut rates, interest rates remain elevated.
- Underwriting standards continue to be disciplined.
- Operating expense increases, particularly insurance and real estate taxes, have moderated but remain elevated compared to transactions acquired/underwritten several years prior.
Lending Pipeline and Appetite:
- CRE transaction and lending volume increased slightly leading up to and following the recent interest rate cuts in September and November, but activity is still muted overall.
- Capital markets lending remains open from multiple sources and pipelines slowly continue to build heading into 2025. An uptick in refinancing activity has resulted in some portfolio lenders becoming increasingly focused on retaining existing loans and winning new quality business.
- With the recent jump in longer-term rates in Q4, coupled with the expectation for additional interest rate cuts on the horizon, shorter-term floating-rate deals with prepayment flexibility remain the most attractive products for borrowers in the market.
Asset Management: Recent improvement in capital markets conditions, most evidenced by strong CMBS market issuance, has created more tangible financing options for borrowers and increased refinancing activity.
- Still, elevated interest rates and high cap costs continue to require substantial liquidity from many borrowers and generate elevated overall refinancing risk.
- Lenders continue to address maturing or challenged loans with a variety of strategies, including loan sales.
Capital Markets: Year-to-date SASB issuance is at near-record levels ($68.7 billion vs. previous high in 2021 of $76.5 billion for the same time period) and lenders are open for business as both transaction activity and loan refinancing pick up pace.
What They’re Saying: Lenders spent much of the pre-election period awaiting 2024 election results to best understand ramifications for the CRE market. The effects of shifting policies on interest rates, economic growth, and regulatory considerations will materially influence lending strategies and market liquidity in 2025.
Key Policy Committee matters:
- Basel Endgame: Bank Capital Requirements
- Foreign Investment
- Beneficial Ownership Reporting
- SEC Climate Reporting
- NAIC Ratings
- National Flood Insurance Program
What's Next: Forum Leaders look forward to presenting CREFC members with an update on their forum at the Annual January Conference in Miami. As June 2025 approaches, the chairs will seek nominations for the next Chair-Elect to join their leadership slate.
- To join the Portfolio Lenders Forum, please register here.
Contact Rohit Narayanan (rnarayanad@crefc.org) for any Forum related questions.