US Leads in Real Estate Lending

NEWPORT BEACH, CA-There isn't a lot of real estate lending going on outside of the US, according to Charles “Chip” Fedalen, Jr., EVP and group head of the real estate banking group at Wells Fargo & Co. Fedalen joined several others on a capital markets power panel during NAIOP SoCal's annual Fall Forum here recently.

Fedalen said the US is currently in the accelerated phase of the real estate lending cycle and added that he sees tremendous activity on the brokerage side, an activity level that is similar to that of 2005 to 2006 in that it is not yet peak but close to it. He also noted that a good one-third of Wells Fargo's business is construction, which is an encourage sign for the market.

The panelists—which also included Pat Jackson, CEO and founder, Sabal Financial Group; Bo Mills, managing director and head of industrial capital markets for the western US for Jones Lang LaSalle; Len O'Donnell, president and CEO, USAA Real Estate Co.; and Scott San Filippo, partner/acquisitions with Greenlaw Partners—agreed that it's a heavy execution bed if you're considering a transitional asset in a less-than-desirable area, acquired for below replacement cost. According to O'Donnell, his firm manages its risk by really looking at the fundamentals and will always ask who will lease the property and why before buying.

O'Donnell also shared that USAA is planning to be a net seller and added that the world is awash in capital that is all seeking the same thing: core properties in the best locations in gateway cities. For this reason, his firm is looking to more development.

When commenting on the current cycle, the panel agreed overall that there is a very fundamental change today from 20 years ago, when there was more private, entrepreneurial equity in the game. Today, it is very rare not to have institutional equity in one form or another in a transaction, which provides a different discipline. The general feeling was that all of us behave differently when we have limited or no skin in the game.

As GlobeSt.com reported last week, experts argue that the GSEs are needed since they play such a significant role in multifamily financing. MBA Chairman-Elect E.J. Burke recently told the Senate Banking Committee that lawmakers and regulators must craft a long-term plan for multifamily housing that ensures a role for both private capital and the federal government. At the same hearing, Committee Chairman Tim Johnson noted the important role of Fannie Mae and Freddie Mac in the multifamily housing market and cautioned that broad access to credit must continue to be available as GSE reform moves forward.