From September 7-9, the California Mortgage Bankers Association (CMBA) will hold its Western States CREF Conference 2022 at the ARIA Resort & Casino in Las Vegas, covering the hottest financial topics in the commercial real estate industry.
The first afternoon of the conference will feature an opening session titled “Marketing Strategies in the Modern Era,” featuring a panel of loan originators sponsored by Red Oak Capital Holdings. The head of this company is Gary Bechtel, who is also the chairman of the CMBA 2022 Western States Conference.
Bechtel assumed leadership of Red Oak in 2020 to lead the investment management team with direct oversight of all portfolios. He has built an investment platform with $300 million in assets under management and nearly $1 billion in funding capacity. He also recently launched Oak Institutional Credit Solutions, a $500 million private real estate finance investment fund created specifically to serve the foundation and endowment investor class. This is the latest chapter in a distinguished career that includes Chairman of Money360, Director of Loans/Originations at CU Business Partners, LLC, management or production positions at Grubb & Ellis Company, Meridian Capital, Johnson Capital and Moreover. During his career, Bechtel has been involved in originating, underwriting, structuring, placing and closing more than $10 billion in commercial debt transactions.
ConnectCRE recently spoke with Gary Bechtel about the upcoming CMBA conference and also covered several other topics, including recent economic volatility.
Q: In addition to chairing the conference, you will also moderate a round table and interview Hessam Nadji. What are some of the key themes around this year’s conference compared to last year?
A: Last year, in addition to traditional topics such as market direction, interest rates, etc., there was still a lot of talk about COVID and its impact on the business. This year, while COVID and its long-term effects will always be a topic, I think the biggest talking points will be about the economy, the impact of a rising interest rate environment, how inflation affects the real estate economy and project costs and investors demand both for the acquisition of properties and for investment in debt instruments. I’m sure many people will also talk about how all of this will affect the loans in our portfolios and the proactive steps that can be taken to maintain high credit quality.
Q: The conversation you will have with Hessam Nadji is titled “Recalibrating Capital in a Rapidly Changing Climate”. How would you describe the challenges faced by borrowers and lenders in adapting to these rapid changes?
A: It will of course be different for both. Borrowers will face a rising interest rate environment, with most lenders becoming more conservative in their approach, which will generally produce a lower loan product, requiring more equity from the borrower. Lenders will take a more measured approach, needing to be very aware of what the future holds in terms of future interest rates and economic conditions to ensure they can be underwritten at loan maturity. , especially for those lending on new construction and in deck space. .
Q: In the current environment, do borrowers or lenders have more advantages or do they have none?
A: I’m not sure I would give either a huge advantage, but clearly the lenders have the advantage as they will still be able to issue money, but now with a component of equity higher than in recent memory. Borrowers are going to have to bring more equity to the table and can expect to pay more for the money they borrow. Lenders have definitely become more cautious over the past 60-90 days as rates across the board have risen as the economy shows signs of slowing.
Q: With the current economic headwinds, which specific real estate sectors are more or less likely to receive loans?
A: Multifamily and industrial continue to be industry darlings, but even they are cooling off. There are opportunities in other asset classes, even hospitality is doing quite well in some markets. Retail, particularly malls and “big box” stores, continues to struggle, although well-located neighborhood and strip centers are still doing well in most markets. Urban Office still faces challenges, with Suburban Office generally outperforming Urban in many areas, a trend we saw during the height of COVID.
Q: Can you tell us a bit about Oak Real Estate Partners’ recently launched $500 million fund for institutional investors?
A: Oak Institutional is a continuation of our business expansion, focusing on high-quality, low-leverage lending and raising capital only from institutional sources such as insurance companies. life, pension funds, endowment funds, family offices, etc. So far, everything has gone very well. received and we recently completed our first transaction for this. Institutions continue to seek higher risk-adjusted returns in the alternative lending space and this vehicle provides them with an excellent opportunity to gain exposure to real estate and generate higher returns than some of their other investments.
Q: What do you see as prospects for 2023?
A: I think in general it will be a slower year than 2022 as this year started well but has shrunk in the past 60-90 days. Unfortunately, I don’t see anything on the horizon that will change the current trajectory, although the midterm elections may have some effect. We are basically at full employment so I don’t know where the growth will come from and if inflation persists things could continue to slow as we are already seeing major companies announcing hiring freezes or layoffs. Lenders and borrowers should prepare accordingly!