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CRE Finance World, Summer 2014

Editor’s Page Letter from the Editor A publication of Summer issue 2014 sponsored by CRE Finance World Summer 2014 3 “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” —Sir John Templeton t’s been 20 years since the CMBS market and CREFC emerged from the “fog and mist” of the Resolution Trust Company (RTC) crisis days. In honor of the occasion, our lead article is devoted to the thoughts and reflections of past CREFC leaders on the challenges they and the industry faced over that time. Whether it was the Russian Default of 1998 that shut down the industry by cutting off B-piece financings and saw traders in beach clothes frantically rushing to work to protect their positions, the creation of CRE CDOs to help match fund B-pieces that helped restore the market or the excessive use of the same CRE CDO structures to push leverage thru the ceiling that helped lead to the crash of the commercial real estate finance and property markets, this industry has tended to periodically evolve in a dramatically volatile way. New concepts are introduced, new twists put on old ones and markets react, with all the resulting ramifications, both good and bad. Indeed, an article in this issue is devoted to the reemergence of “CRE CLOs” that hopefully will, as CMBS veteran Tad Philipp and his colleague write, “nurture some assets to stabilization and…play an important role in the recovery phase of the cycle. They are … financing the specialty lenders who are helping clear the backlog of troubled loans. The specialty finance company achieves matched term funding for their loan portfolio rather than the short-term and callable alternatives.” Sound familiar? And for the last 15 of those years, this magazine has been along for the journey documenting, reflecting and analyzing its twists and turns. One need only look at that first issue (see Figure 1) to see how much and how little has changed. Bear Stearns, my alma mater, was one of the primary sponsors, Lehman Brothers was just introducing its CMBS index and this magazine and Association were exclusively focused on CMBS. On the other hand, there were articles on whether underwriting was being pushed and discussions as to how the CMBS market was recovering from its collapse the year earlier. Perhaps it’s the nature of commercial real estate and a financing technique dependent on the fickle capital markets for its’ funding, that make this industry volatility chronic and endemic. Yet here we are today, an industry and an Association as strong as ever now more broadly diversified, again riding the upswing of the most recent commercial real estate cycle. And while there will surely be another down phase and we have yet to face the upcoming, refinancing tsunami of some $360 billion of adversely selected loans written near or at the market peaks of 2006 and 2007, our ability to endure the challenges of the past, should give us all great hope for the future. Happy 20th Anniversary CREFC! Happy 15th Anniversary CRE Finance World! I Brian P. Lancaster President The Minot Group LLC Professor of Finance Stern School of Business, NYU Figure 1


CRE Finance World, Summer 2014
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