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CREFW-Fall2014 10.15.14

Editor’s Page Developing Issues in the American and European Real Estate Cycles A publication of Autumn issue 2014 sponsored by CRE Finance World Autumn 2014 3 elcome to the Fall 2014 issue of Commercial Real Estate Finance World. Having culled through a number of excellent submissions, we have created an edition that focuses on issues in the US and European real estate recoveries. In so doing, it becomes readily apparent that the relative state of the commercial real estate finance and CMBS markets in the US and in Europe are much like the relative state of these two giant economies. The US is significantly ahead of the curve in terms of its economy and capital markets, while Europe could be characterized as being where the US was perhaps 3 years or so ago. Among our topics showing the more advanced state of US commercial real estate finance, Lea Overby, Steve Romasko and Radhakrishna Gowrishankara, of Nomura explore the growth, drivers and potential of a new securitization market that is neither RMBS nor CMBS but a combination of the two in “Little Pink Houses for You and Me: An Introduction to Single-Family Rental Securitizations”. Is the market here to stay or a temporary “end game” in the US residential real estate crash and recovery? Senior housing, a market often associated with volatility and one that requires significant confidence to invest in, is explored by Dr. Victor Canalog in his article, “Is It Time to Invest in Senior Housing?” Finally Clay Sublett, in the ultimate nod to the rapid US capital market recovery, post crash, delves into the very un-European problem, “Are Capital Market Cycles Shortening — And So What If They Are?” By contrast, in Europe, while we are encouraged by some 8 billion or so euros of CMBS issuance, we explore issues that are hampering the real estate finance recovery there as well as reasons why financing techniques, like CMBS, don’t seem to have quite taken off in financing non-performing loans even though conditions seem ripe. For example, Hans Vrensen does an excellent job showing how interest rate swaps linked to floating rate loans have triggered complications and significant delays in the UK lending market’s turnaround in his, “Swaps Impact on the UK Lending Market, A Closer Look at the Evidence” while Iain Balkwill of Reed Smith argues that a confluence of investor demand for bonds with higher yields, existing NPL investor demand for greater leverage and current CMBS technology should make CMBS a strong potential tool for financing non performing CRE loan portfolios but has not, at least not yet. We hope you like this issue and find it helpful in understanding what is happening in these two huge real estate markets. While it is somewhat discouraging that the European recovery is not further along, investors can take solace in the fact that the European Central Bank now seems to be following the more dramatic moves already taken by the Federal Reserve. If that continues and European real estate markets follow the US pattern, European real estate may actually be the better place to be in the coming year. Time will tell. W Brian P. Lancaster President The Minot Group, LLC Professor Stern School of Business, NYU


CREFW-Fall2014 10.15.14
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