Experts Examine State of Economy, CRE
Online PR News – 14-November-2019 – San Diego, Calif. – Top real estate, legal and finance industry leaders examined the state of finance and commercial real estate industries as well as overall economic trends at the recent 19th Annual Trigild Lender Conference at the Hotel del Coronado.
Hot topics at this year's event included the cannabis industry, climate change, technology and artificial intelligence, the sharing economy, affordable housing, President Trump's tax overhaul - and the perennial question: when will the next recession hit?
While there's no crystal ball to predict when the next downturn will hit, most agreed its best to get ready for a few bumps in the road.
On a positive note, 20 million jobs have been created since the Great Recession ended in 2009. But while the economy is in a favorable place, three areas of major concern - slowing global growth, trade policy uncertainty and inflation - are raising red flags.
Panelists were especially wary of the multifamily market. The lack of affordable housing in the United States presents significant challenges said BlackEagle Real Estate Partner's Debra Morgan. "We are not doing enough for affordable housing as a whole in this country," she said.
"Multifamily has been the golden child, but we are seeing cracks," noted Ballard Spahr's Kelly Wrenn.
While no one is certain when the next cycle shift will arrive, one thing is clear, said moderator Mark Weibel, a partner with Thompson & Knight. "It will be complex."
More Market Disrupters
The impact of climate change, technology, artificial intelligence and the sharing economy on the commercial real estate industry generated heated discussion.
According to Trigild vice president Kevin Berry, "Climate change has been the biggest disrupter of many businesses for the last five years with national disasters such as wildfires, hurricanes and tornadoes on the upswing."
Another key disrupter, noted Prodeal's Patrick Janson, is emerging technologies and this country's rapid evolution into a paperless society. Kevin Tatro of Acres Capital noted the "ability for small firms to leverage technology gives them a significant competitive advantage."
Technology segues into another leading disrupter, the sharing economy, which has led to the emergence of high-profile platforms such as Uber and Airbnb. "The younger generation just doesn't want the burden of ownership anymore," Janson said.
CRE Challenges and Opportunities in the Cannabis Industry
Perhaps one of the biggest disrupters in today's economy is the cannabis industry. A panel of legal and finance leaders with extensive experience in the cannabis sector examined the risks and upsides of this emerging market at the conference.
"The industry has evolved to become much more sophisticated," said Stinson's Zane Gilmer, panel moderator.
Since cannabis is legal in some states but illegal federally, there are multiple challenges for anyone involved in this growing industry, including the fact that there are only five banks that lend to the cannabis industry.
Other challenges relate to leasing, insurance, zoning ordinances, environmental issues - and mounting litigation.
Bert Haboucha of Atlas Capital Advisors likened the industry to the "wild, wild west."
"There are enormous amounts of money being made and everyone wants a piece of it. The biggest players out there are waiting for the day when it is federally allowed," he said.
"Ultimately," said Oren Bitan, chair of the cannabis and hemp industry law group at Buchalter, "Cannabis is too big of an industry to ignore. It will be the biggest crop in California; it's just a matter of time."
The annual conference is the industry's longest running commercial real estate debt conference, and the growing importance of debt funds was examined in detail, including the growing practice of bridge and event-driven lending. This short-term lending solution has taken on a more institutional profile and become a more significant source of capital for the real estate market.
Society is driven by a need for speed, which has fueled a surge in bridge lending. "There are more bridge lenders now than ever," said Pender Capital's Neil Beldock.
A white-hot real estate market creates problems and can make for bad lending decisions. "The benefit of appreciation can get you out of bad decisions," said Beldock.
"In a competitive market, bridge lending provides the speed and flexibility needed to tailor solutions and close deals in a timely manner," said Michael Fleischer of 3650 REIT. "We are in a relationship driven business, and while an investment may experience bumps in the road (as most developments do), the solution will often flow through the borrower, which is why we believe maintaining good relationships with our borrowers is of the utmost importance," Fleischer emphasized.
The bottom line? As values continue to flatten, there are mounting risks. "As a lender you get what you deserve," said Beldock. "If you soften underwriting, you will end up with more defaults."
Added Fleischer, "If lenders disregard their underwriting discipline in an effort to control deals, there will be a day of reckoning."
Headquartered in Dallas and San Diego with offices throughout the country, Trigild has 40 years of management and fiduciary expertise, with a focus on managing and maximizing value for assets in an array of industries, including commercial real estate, multifamily, hospitality and more. Since its inception, Trigild has developed a full service national operating platform providing institutional quality services to private real estate investors and financial institutions. For information, visit www.trigild.com.