FOR IMMEDIATE RELEASE
Annual Trigild Spring Lender Conference in Dallas Addresses Hot Button Issues Related to CRE, Tax Reform and Capital Markets
Seventh Annual Event Held in Dallas
Trigild welcomed commercial real estate and finance industry leaders from across the country to the seventh annual Trigild Spring Lender Conference, held at the Hotel ZaZa in Dallas.
According to Judy Hoffman, Trigild president and Lender Conference founder, the conference offered presentations by top industry professionals, providing a “great forum to bring the latest trends and developments in CRE servicing, lending and investing, as well as the legal and tax issues that will have an impact.”
A detailed keynote presentation by Victor Canalog, Ph.D, chief economist and senior vice president at Reis – focusing on key issues in CRE, including risk management and valuation – was an event highlight.
Key points of his presentation include:
- The nation’s long-term growth potential is 1.9 GDP, with the high twos possible for 2018. Much above 1.9 growth may be inflationary; below, it may be recessive.
- Wages may be rising, but people should be wary of the potential for offsetting effects. At some point, higher inflation expectations may pressure real estate cap rates upwards.
- Weekly job rate growth should be between 105,000 and 110,000.
- Once employment turns negative for one month, there is 50 percent chance of recession; at two months, it increases to 80 percent.
- An inverted yield curve has predicted a downturn within one year the last 12 of 13 times. Our yield curve is flattening.
- Productivity increases during recession because (1) there are fewer employees doing same thing, and (2) workers work harder.
- Consumers and investors should be aware of surprises on fiscal policy and the potential for trade wars.
- Property types are experiencing varying business cycles. The outlook is vibrant for industrial, oversupplied for multifamily and self-storage, and generally flat for office, retail and senior housing.
Is a Downturn on the Horizon?
Mark Weibel of Thompson & Knight led a thought-provoking panel on “Commercial Real Estate from Every Angle” addressing trends and predictions related to political risk, foreign investment, pension activity and more. The panelists included servicers, lenders and investors, and they all agreed primary CRE markets have peaked while secondary and tertiary markets that have been flat since 2007 face a more severe potential for loss. While they projected moderate growth for the next two years, they anticipate a downturn in 2020.
Panelists also expressed concerns about over exposure in the stock market among some public and private pension funds while they are under exposed in commercial real estate.
In many markets, “there is a lot of dry powder because investors cannot find properties that meet their yield curves.”
Exploring characteristics of some of the more overzealous lenders generated quite a bit of discussion among attendees. The panel identified community banks with assets under $10 billion, big banks with 30 percent of loans in real estate, as well as credit unions as having potential overexposure should there be a significant downturn in the commercial real estate cycle.
Implications of Tax Overhaul
In addition to partaking of networking opportunities throughout the event, participants got an extensive look at the 2017 Tax Cuts and Jobs Act from William J. Sanders and John T. Woodruff of Polsinelli, P.C. and Dianne Umberger of E&Y.
The panel cautioned there are many moving parts to the tax reform bill, from the newly designated “opportunity zones” to revisions in the tax rates to changes affecting depreciation and expenses. Key changes impacting real estate, they said, are the carried interest three-year hold requirement, now taxable contributions by government entities; use of losses to offset income limited to $500,000; and limitations on NOLs. On a positive note, in terms of the 20 percent deduction of qualified business income, “the provision will require significant IRS guidance, but it should produce very favorable results for capital intensive real estate businesses.”
Additional speakers at the event included: Don Sheets, Clarion; Kevin Donahue and Salman Khan, Stabilis Capital; Alan Williams, KeyBank; Brian Bailey, FDIC; Robert Brasfield, Trimont; Tom Shearer, CWCapital; Adam Singer, Rialto Capital; Rob Records, Cohen Financial; Michael Carp, SAS; Rob Cohen, Suntrust; Steve Evans, Principal; David Harrison, Midland; Greg Dryden, Aegon; Kevin Berry, Trigild; Michael Bernstein, Artemis; Steve Crosson, Capright; Steve Schrag, KeyBank; Niral Shah, Rialto Capital; Cara Houck, Miller Canfield; Brett Anders, Polsinelli; Nancy Daniels, Trigild; Abeer Ghazaleh, Prudential; Amber Sefert, Trimont; Scott McLeod, Fannie Mae; and Curt Spaugh, Situs.
Event sponsors included Key Bank Real Estate Capital; Capright; Miller Canfield;
Polsinelli; Venable; Baker Donelson; Dickinson Wright; Sheppard Mullin; Thomson & Knight; Warner Norcross + Judd; Benesch, Friedlander, Coplan & Aronoff; Duanne Morris; O’Connor Cochran; Parker Poe Adams & Bernstein; Pepper Hamilton; Commercial Mortgage Alert; Commercial Property Executive; and Scotsman Guide.
Trigild is already making plans for its Fall Lender Conference to be held October 17 – 19, 2018 in San Diego.
Bonita Paysour Bonita.Paysour@trigild.com 858-242-1153