MBA Outlook: Optimism Amid Concern

Berman

SAN DIEGO-The recovery now under way in the economy and the commercial real estate markets will continue this year, but concerns remain on the local, national and international fronts. That's the word from speakers at the Mortgage Bankers Association's 21st annual Commercial Real Estate Finance/Multifamily Housing Convention & Expo.

Panelists at the opening general session of the event, being held at the Manchester Grand Hyatt hotel this week, generally expressed optimism amid concerns that ranged from the workings of the mortgage industry itself to outside influences beyond its control. The panelists tackled the topic in a panel session in which moderator Michael Berman, chairman of the MBA, asked them what factors they were most focused on that might affect their industry and the overall recovery.

MBA Panel

Panelist E.J. Burke, EVP and group head of KeyBank Real Estate Capital, cited a rising confidence that he sees among tenants, pointing out that, "Business owners are starting to hire people, starting to show some confidence." Burke said his concern is "anything that would cause a typical business person to become nervous and put off decisions," regardless of whether it is a local matter, a problem in Europe or a problem in Egypt. He also cited the problems that local and state governments have suffered as the downturn has reduced their revenues.

CEO Patrick Halter of Principal Real Estate Investors cited the same concern about local and state governments, pointing out that those governmental entities have already contracted by 250,000 jobs since 2006 "and the cutting isn't done yet." On the other hand, Halter pointed to improving business conditions and suggested that "We may be surprised at the resilience of consumers" as the recovery continues.

Another factor cited as key to the recovery was the recurring theme that jobs are essential if the comeback is to remain sustained. "It's all in the jobs," said Jack Cohen, CEO of Cohen Financial. "Jobs mean people. People fill space. Space pays rent, rent is NOI and NOI is value."

Cohen said another key to the recovery is having "borrowers who are willing and able to act." Said Cohen: "I don't believe that we have a liquidity crisis, we have a transaction crisis."

In opening remarks before the general session, MBA president and CEO John Courson outlined another factor that will influence the recovery: the Obama Administration's approach to regulating the industry, specifically Dodd-Frank regulations. Courson outlined the MBA's role in tracking pending legislation and trying to ensure that it makes sense from an industry standpoint.

Courson's comments served as a precursor to the second general session at the conference, scheduled for today, which will feature a panel discussion on key legislation and expanded involvement of Washington in the commercial/multifamily mortgage industry. Among the subjects discussed will be Dodd-Frank, Regulation AB revisions, rating agency reform and international regulatory efforts. The panel will also take a look at how legislation is affecting capital sources.