CREFW-Summer2015

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CRE Finance World Summer 2015
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ecall the chemistry demonstration where a beaker of
water was placed onto a Bunsen burner, and as it boiled,
the vapor collected in another beaker as it cooled off.
In grammar school we thought it was magic, but by high
school we realized it was pure science. As we grew older,
and our viewpoints and horizons expanded, the experiment can
be thought of as indicative of the circle of life and the cosmic
meaningfulness of how this simple experiment could keep our
planet, if not the entire universe alive.
Well, a similar experiment is in full force with respect to distressed
realty assets. Things have indeed heated up as a flood of money
has come to commercial real estate finance resulting in an
evaporation of the opportunities available in non-performing loans.
Competition for new loans is intense and as lenders look deeper
and further for yield, they are funding riskier and more transitional
deals, driving up values. This heating up has started to bubble over
resulting in troubled deals vaporizing right before our eyes. Have
they disappeared? Not exactly — just like the water vapor of our
simple experiment, they are merely in another form, waiting for
things to cool off until they condense and fill some other container
ready for consumption by those seeking that new liquid NPL.
In short — we are in the part of the commercial real estate finance
cycle where it’s easy to borrow, increasingly valuable to sell and
harder and harder to find great opportunities at marked down
prices. This has been the message that has resounded at all of the
HYDRA Forum meetings and summits held over the past year. Yet,
there is a realization that cycles are called cycles because they are
ever changing and evolving and the opportunities that evaporate
will condense elsewhere and there will be new water for those who
participate in the distressed realty markets to drink.
Despite the evaporation of opportunity, the HYDRA Distressed
Realty Sub-Forum has remained active and has grown in participants.
John D’Amico of Trimont Realty Advisors has served as Chair of
the Sub-Forum and Jonathan Schultz as Chair-elect over the past
year. Working together with Nik Chillar and Donald Sheets of the
High Yield sub-forum and other members of both sub-forums, we
have carried out two Forum Conference meetings, two Summits,
an After Work Seminar and a high exposure, high fun reception to
attract new forum members.
CREFC Annual Meeting, New York, June 2014. The June 2014
HYDRA meeting featured a much more interactive style meeting
where audience members were sought out to spar with a panel
consisting of HYDRA leadership. John D’Amico roamed the room
with a microphone, peppering Kevin Donahue, Greta Guggenheim,
Bill O’Connor and others with pointed questions and then sought
follow up comments from Forum participants. The conversation
proved lively and Forum members were able to address a variety
of topics of interest.
CREFC Investors Conference, Miami Beach, January 2015. The
January Forum meeting featured a fascinating presentation
by Donald (Don) Sheets on the correlation between oil prices
and United States commercial real estate values. Don gave an
interesting view not only on markets in Texas and North Dakota,
but throughout the country. While many thought that improved
consumer cash flow could have a positive effect on commercial
real estate, Don’s statistics pointed to a possible decline in
commercial real estate values as those states which led the
country out of the recession reverse direction by reason of reduced
oil production.
HYDRA Summit East, New York and CRE Finance Summit West,
Santa Monica. HYDRA ran a very successful Summit in New York
in March and as of this writing is planning the West Coast Summit
to be held in May. The number of participants in both Summits has
held up despite the lack of availability of distressed product and
the emphasis of the Summits has moved more towards high yield
investment and new focuses of investment such as construction
financing, EB5 investment and crowdfunding.
After Work Seminar — The Risk and Return in High Yield Lending.
While this event is currently being planned for New York on April
16, 2015, it will have occurred by the time this article is published.
I trust that it will be another quality event with lots of interesting
and useful information provided to all attendees by our panel plus
another great opportunity to network with industry participants.
HYDRA Reception in conjunction with the Trigild Lenders
Conference in San Diego. Once again the HYDRA Forum was able
to hold an evening reception at the fall Trigild Lenders Conference
in San Diego. The purpose of the reception was to introduce
industry participants, especially those on the West Coast, to the
HYDRA Forum and CREFC, the “voice of commercial real estate
finance.” It is amazing that there are people involved in commercial
real estate finance who do not truly understand what CREFC and
HYDRA do and membership increases can be directly related to
these receptions.
HYDRA is committed to providing the best education on the most
up to date issues facing our industry and the best way to take
advantage of this mission is to get involved. We urge everyone to
join the Forum and provide it with your energy and ideas. In the
meantime, keep your eye on that second beaker — it’s likely to start
showing some condensation very soon.
R
HYDRA Sub-Forum Spotlight
Distressed Realty Assets
Sub-Forum John D’Amico
Director
Trimont
FORUM SPOTLIGHT