Crittenden CRE Finance Conference Highlights: Key Takeaways and Insights – Part 1 of 2

The author attended the recent Crittenden commercial real estate finance conference in Miami Beach which brought together industry experts and professionals, providing valuable insights into the current trends and challenges in the market.
Here's Part 1 of 2 with a comprehensive summary of the top nine points discussed during the event:

1. Non-Bank Lenders are Stepping Up:

• • Niches make riches. Despite overwhelming negativity in the mainstream media of a finance desert, non-regulated, niche lenders have witnessed robust performance and growth. 
  • While conventional lenders such as banks and credit unions have slowed their pace of lending, non-bank lenders have filled the gap.
  • Non-Bank lenders are providing bridge loans, bridge-to-bridge loans, rescue loans, renovation loans, and ground-up construction loans. 
  • Un-Conventional lenders are seeing an unprecedented increase in deal flow, some seeing as many as 100 submissions a day.
  • The only way to get to the “top of the pile” with a non-bank lender is having a repeat relationship with capital providers, or through a financial intermediary with a reputation for underwriting, evaluating, and pre-screening deals for lenders as opposed to “throwing it against the wall and seeing what sticks”. 

2. Sponsorship matters:

• • A sponsor needs to be able to more than fog a mirror and pass a background check that they have not been recently released from prison for financial-related crimes. 
  • Sponsors need to show strong conviction in their deals by writing significant equity checks. 
  • Sponsors that rely too heavily on syndication and OPM (Other People’s Money) will find it difficult to obtain capital. 
  • Sponsors need to show strong net worth, liquidity, and global cash flow.
  • Lenders are using sponsor conviction to screen opportunities. If sponsors are not writing big enough checks and are relying too much on outside, passive investors, lenders are taking a pass.

3. Office Market Transformation: Hybrid Work Model:

• • Covid 19 changes everything in the workplace.
  • Traditional office workers have learned how to work and be productive from home.
  • The traditional office market with workers spending 5 days a week in drab, nondescript offices, well known to the older generations, is undergoing significant changes.
  • The new generation of office workers desire more efficient and flexible workspace solutions.
  • Companies have embraced a hybrid work model with employees able to work from home certain days and mandating employees spending two or three days a week in the office, emphasizing the importance of maintaining physical office spaces even in a hybrid work environment.
  • Tenant needs have evolved, a tenant that previously needed 50,000 sq ft has been able to reduce their footprint to 20,000 sq ft.
  • Employees don’t want to come to work in a Class B&C office. If they are going to commute to the office, it needs to be attractive and have a sense of place. Highly amenitized Class A office space is staying leased, class B&C office space is struggling. 
  • Many lenders have stopped lending on office space, unless it is medical office space near a market-leading hospital.