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CRE Finance World, Autumn 2013

A publication of Autumn issue 2013 sponsored by CRE Finance World Autumn 2013 19 Lisa Pendergast: Larry, are there enough B-piece investors to deal with risk retention? Larry Brown: My belief is yes. There are probably seven legitimate contenders and maybe five or six more “pretenders” who are looking at these deals from the B-piece perspective. So I do think there is a healthy B-piece market. Like you alluded to Lisa, I do think there are a couple of head-scratchers left in what is being proposed regarding risk retention. All credit to CREFC for making it so it is at least bearable and perhaps over the next three years, we can work out those last two or three items. So it’s a net positive for our industry, if you think of it as a long term game, and we are not just doing it for 2013, and it is workable and will hopefully become even more workable. Lisa Pendergast: It has to be difficult to operate in an environment where the sands are shifting. Mitch, how do you operate in this environment and is there a way forward for the GSEs in the multifamily space that makes some sense? Mitch Resnick: You said it very well, the sands are shifting. But how do you operate in this environment? You can’t run the business on what-ifs really. We don’t know what the future is going to hold, and it doesn’t seem like we are getting there anytime fast, either. For example, if folks were operating their business based upon a conjecture of what the regulations are going to be, starting three years ago, then they wouldn’t have done any business for the last three years. We don’t have the final say on what the regulations are going to be, I know that there are some folks in the industry who are saying, ‘just tell us what the rules are so we can move on.’ Uncertainty is never a friend to the marketplace as far as stability is concerned. Uncertainty does not beget liquidity. It works quite the opposite way. So having some vision and clarity as to what the rules and regulations will be regarding the marketplace will be helpful in its own right. Now, how those rules and regulations play out is a different story. We need to be sure that the regulations are not too harsh so that it doesn’t do opposite of what they are intending to do. You don’t want regulations that choke off the market too much. That is the fine line to walk right now. The regulators basically have a thankless task in front of them; it’s not an easy thing to figure out. Lisa Pendergast: You have all been very giving of your time and energies and I want to thank you. Our discussion has been captivating, funny, and at times even profane (don’t worry, it’s been edited out). On behalf of the CRE Finance Council and CRE Finance World, I want to thank everyone for their participation and insights. Panelist Bios: Lisa Pendergast Managing Director Jefferies LLC Lisa Pendergast joined Jefferies LLC, a subsidiary of Jefferies Group LLC. (NYSE: JEF), in July 2009 as a Managing Director and Head of CMBS Strategy and Risk in the Fixed Income Division’s MBS/ABS/CMBS Group. Ms. Pendergast has more than 20 years of industry experience in the structured-finance markets. Prior to joining Jefferies, Ms. Pendergast was a Managing Director in the Fixed-Income Strategies Group at the Royal Bank of Scotland, where she worked for eight years. Ms. Pendergast provides analysis and commentary on commercial real estate credit fundamentals and relative value within the CMBS and structured-product markets. From 1987 through 1995 and prior to her focus on commercial real estate and CMBS, Ms. Pendergast focused on the residential MBS marketplace as a research analyst at Prudential Securities, co-authoring reports on various securitization structures and mortgage-related bond analyses. Ms. Pendergast has been a top-ranked research analyst in the highly competitive Institutional Investor All-American Fixed-Income Research Team survey in the CMBS category for a number of years. She was the 2010/2011 President of the Commercial Real Estate Finance Council (CREFC) and currently sits on its Executive Committee as Immediate Past President. Pendergast has published several articles and reports on various aspects of the CMBS markets that have appeared in industry handbooks and academic journals, as is often quoted in the financial press on commercial real estate debt-related issues. Ms. Pendergast holds a BA from Fordham University at Marymount College. Larry Brown President Starwood Capital Group Mr. Brown is the President of SMC, overseeing all of the lending and subsequent securitization activities of the firm. Prior to forming SMC, Mr. Brown was a co-founder, Managing Director and Chief Operating Officer of AllBridge Investments, an investor in the commercial real estate capital markets. Before co-founding AllBridge, Mr. Brown started Deutsche Bank Mortgage Capital, L.L.C., a wholly owned subsidiary of Deutsche Bank, in May 1999 and served as President and Chief Executive Officer through April of 2005. While at DBMC, he oversaw more than $23 billion in public and private securitized transactions as well as the origination of over 750 loans totaling approximately $9 billion. Prior to the formation of DBMC, Mr. Brown served as President of WMF Capital Corp., where he oversaw all commercial real estate finance and capital markets activities of the company. Before joining WMF CC, he was the Managing Director of Commercial Real Estate Finance at First Union National Bank (now known as Wells Fargo), co-founding the Real Estate Capital Markets Group and overseeing the origination and subsequent distribution of commercial mortgage-backed securities including over CRE Finance World Roundtable: Macro Issues Facing CRE Finance


CRE Finance World, Autumn 2013
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