By Tim Trainor
November 9, 2015
The 300 or so real estate investors, brokers and developers who attended the Saul Ewing Real Estate Conference at the Baltimore Convention Center last week were in a decidedly positive frame of mind, and for good reason. Many industry observers consider the current market to be as good as it gets in real estate, with plentiful financing options, declining vacancies and increasing rents and ROI's.The one complaint among attendees was that the favorable conditions meant more competition, be it for listing agreements, investment sales or providing financing. The generally upbeat atmosphere was a far cry from the conference's first year in 2008, when the Baltimore market, as well as much of the U.S. was just beginning to emerge from a paralyzing recession."We've certainly come a long way," noted Howard R. Majev, a partner in Saul Ewing's real estate practice and one of the lead organizers of the annual conference. "These things move in cycles so it's good that we come together each year to talk about new challenges and opportunities. Creativity is the common thread. There will always be opportunity for creative approaches to investing, lending and developing."The conference featured panels on several much-discussed real estate topics, including new development options, Millennials' real estate choices and the gravity-defying multifamily sector.However, much interest among attendees was focused on the financing panel, which featured two traditional lenders, Tony Marquez, executive vice president and chief real estate lender for EagleBank, Kieran Quinn, managing director for institutional lender Guggenheim Partners, and an upstart real estate crowdsourcing firm, Fundrise, represented by founding member, chief operating officer and head of product Brandon Jenkins.
Panel moderator John B. Levy, president of his namesake investment banking firm, deftly quizzed the panelists on their lending parameters and risk tolerance, mixing his own questions with others texted to him by the audience. Jenkins patiently explained how an online investment platform like Fundrise differs from traditional lenders, responding to several questions on its minimum investments from accredited investors, its procedures for raising funds and acquiring real estate. The chief distinction he noted is that Fundrise investors do not take stakes in the underlying real estate, but rather in project payment-dependent notes backed by a trust.In one regard, Jenkins said his firm has just as much in common with all other real estate investors."The internet didn't take the risk out of real estate," he said. "It may have changed the way we raise money for investment, but there are still a lot of (high risk) real estate deals out there. We all still have to do our due diligence to separate the good deals from the bad."Guggenheim's Quinn and EagleBank's Marquez both noted the effect from increased competition in real estate lending, most notably narrowing margins and increased demands from borrowers. At the same time, increased regulation and risk management requirements in the banking sector are increasing their costs and reserve requirements."It's certainly not like the margins we were seeing a few years ago when fewer were doing real estate loans," noted Quinn.Most lenders are focusing more on risk management in their lending, added Marquez. "For the right deal we will certainly be competitive, but we're always looking for ways to mitigate or hedge risk and protect our shareholders' lending capital." He cited a quote from a favorite movie, the Clint Eastwood World War II action-comedy Kelly's Heroes."There's a scene where the leader asks the tank commander why he has modified his tank to go faster in reverse. The tank commander tells them, 'We like to feel we can get out of trouble, quicker than we got into it.' That's a great answer, and I tell my lending people they need to be like that tank commander."
