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Forum Spotlight: Alternative Lenders and High Yield Investors

December 18, 2023

Together, Samir, Samantha and Thanh form the “Leadership Working Group” for CREFC’s Alternative Lenders and High Yield Investors Forum. Importantly this group sets the agendas and priorities for the Forum, as well as represents their constituencies on CREFC’s Policy Committee.

Why it matters: Each of the Forums interacts and addresses issues critical to their business sector and works to achieve solutions that serve a common purpose. CREFC works closely with Forum leaders and members to:

• Ensure all voices are heard,
• Assist in finding consensus amidst disparate and converging views,
• Share those views when appropriate with regulators and legislators, utilizing CREFC’s experienced Government Relations Team,
• Develop new best practices and monitor old ones.

What they’re saying: There has been significant growth in high yield investors and alternative lending platforms, including lenders for bridge and mezzanine loans, preferred equity, and special/distressed situations, who represent private debt vehicles, public/private mortgage REITs, money managers, and other public or private entities.

As these providers of debt capital continue to navigate unpredictable capital markets, the Forum is focused on the following key areas:

• The role of alternative lenders in a capital constrained market,
• Interest rate volatility and its impact on high yield and alternative lenders,
• Capital raising and flow of funds in the context of the macro environment and negative real estate headlines.

Key Policy Issue:

• Basel Endgame Capital Proposal: The federal banking regulators have proposed raising capital requirements on banks with $100 billion in assets and above.
• The complex proposal could have impacts on competitors and warehouse lines.
• CREFC is working on a comment letter ahead of the January 2025 deadline.

What’s Next?

• Forum leaders will present an update on their Forum at the Annual January Conference in Miami.
• Planning is in full swing for CREFC’s High Yield, Distressed Assets & Servicing Conference on March 6-7 in New York.
• Soon after, the chairs will seek nominations for the next Chair-Elect to join their leadership slate.

To join the Alternative Lenders and High Yield Investors Forum, please register here. For any forum related questions, please contact Kathleen Olin.

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New CREFC Forums

January 9, 2023

In December, CREFC announced changes to its industry sector forums. These forums will debut on Monday, January 9th at the CREFC’s January Conference.

Why it matters:

• A new High Yield Investments/Alternative Lending Forum serves debt funds and others that comprise private lenders and investors in commercial real estate debt (whole loans, mezzanine loans, preferred equity, and sub-performing/non-performing loans).
• An expanded Servicers Forum aligns CREFC members focused on special assets and special situations.

The Alternative Lenders and High Yield Investors Forum will focus on the needs of this growing and important source of market liquidity. Alternative lenders now represent 15% to 20% of annual CRE lending activity.

Membership in this forum will include Alternative lenders and High yield investors in the CRE debt and equity space:*

• Lenders and investors include debt funds, public/private mortgage REITs, money managers, separately managed accounts (SMAs), and other public or private entities.
• Investments include bridge and mezzanine loans, preferred equity, and special/distressed situation opportunities.
• Third-party service providers and business partners who work closely with such lenders and investors.

Updated Servicers Forum

The HYDRA transformation shifts the Distressed Realty Assets (DRA) portion of HYDRA to the Servicers Forum. CREFC realigned the Servicers Forum to include two main focus areas:

• Servicing Administration
• Special Situations/Special Assets

The newly cast Servicers Forum represents market participants with separate leadership teams in the servicing of performing asset and non-performing/distressed assets, and include primary servicers and the GSEs.

The combined and expanded Forum creates a collaborative environment to focus on all servicing and trust administration issues within a single forum, while recognizing the diverse issues associated with servicing performing and non-performing loans.

CREFC Member Action Required: 

• Forum sessions at the January Conference will incorporate the new Alternative Lenders and High Yield Investors Forum, as well as the newly expanded Servicers Forum.
• Conference attendees will be asked at registration to make new forum selections based on their role in the industry and on which forums are of most interest to the member.
• Members not attending the conference can click here to sign up for a forum.

For any forum related questions, please reach out to either Lisa Pendergast or Kathleen Olin.

 * Does not include (is not intended to replace) lenders/investors that are served by the Investment-Grade Bondholders, B-Piece Investors, Portfolio Lenders-Bank, Portfolio Lenders-Insurance Company, or Issuer forums

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CREFC is expanding its Forums to better align industry interests.

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CREFC Introduces New Forums: CREFC Recasts HYDRA Forum to More Accurately Reflect Market Shifts and Developments

December 6, 2022. 

Seeking ways to best serve our over 18,000+ members, CREFC has been hard at work to position its forums to serve the growing needs of its membership. This includes addressing the significant growth in alternative lending platforms, particularly debt funds. These funds comprise lenders and investors in commercial real estate debt, including whole loans, mezzanine loans, preferred equity, and sub-performing and non-performing loans. Alternative lenders now represent 15% to 20% of annual CRE lending activity.

Over the years, content for the existing High Yield and Distressed Realty Assets (HYDRA) Forum has become divergent into near separate discussions that relate to either alternative lending/investing or distressed asset management and special servicing. This divergence has made it challenging to optimally serve the varying needs of existing HYDRA members. With this understanding, CREFC and HYDRA leadership/members undertook a thorough review of HYDRA’s membership and determined it would be best to reassemble the current HYDRA forum and guide its members to either:

• An Expanded Servicers Forum that more fully incorporates special assets/special situations or
• A new High Yield Investments/Alternative Lending Forum

Introducing the Alternative Lenders and High Yield Investors Forum

CREFC and the Board of Governors believe that launching a new and separate forum – the Alternative Lenders and High Yield Investors Forum – will provide a more befitting platform that better serves the needs of this growing and important source of market liquidity.

This new Forum will:

• Afford this CREFC member segment a clear, formal voice in CREFC,
• Allow CREFC to better navigate the rollout and ongoing development of a Debt Fund Index (a joint project between NCREIF and CREFC), and
• Provide members with a stronger voice with regulators and legislators on Capitol Hill.

Membership in this forum will include alternative lenders and high yield investors in the CRE debt and equity space*, and may include bridge and mezzanine loans, preferred equity, and special/distressed situations. Lenders and investors include debt funds (open or closed), public/private mortgage REITs, money managers, separately managed accounts (SMA), and other public or private entities. The forum would also include those third-party service providers and business partners who work closely with such lenders and investors. Importantly, this forum would be instrumental in the development and ongoing maintenance of the CREFC/NCREIF Open-End Debt Fund Index, with the goal of increasing transparency and liquidity in this important sector of the market.

Introducing the New Servicers Forum
A companion component of the HYDRA transformation is shifting the DRA portion of HYDRA to the Servicers Forum. Today, the Servicers Forum focuses on master servicing and special servicing (issues related to distressed or nonperforming loans/assets). Consolidating the constituents and discussion of relevant DRA issues into the Servicers Forum will enable increased focus on these important and timely issues.

CREFC, its Executive Committee, and Board of Governors believe that repositioning the DRA portion of the HYDRA Forum and adding it to the existing Servicers Forum will create better alignment within the servicing sector and allow for better synergies between performing and distressed loans/assets.

With this in mind, CREFC plans to realign the Servicers Forum to include two main focus areas:

• Servicing Administration
• Special Situations/Special Assets

Both constituents within the Servicers Forum will have separate leadership teams that will not only work within their respective components of the servicing business, but also interact with each other on a regular basis to present a 360-degree view of and insights related to the current state of their respective businesses. Note that both the current leadership within the Servicers Forum and the Distressed Realty Assets sub-forum of HYDRA will remain in place.

The newly cast Servicers Forum will represent market participants in the servicing of performing asset and non-performing/distressed assets, and include primary servicers and the GSEs. The combined and expanded Forum will create a collaborative environment to focus on all servicing and trust administration issues within a single forum, while recognizing the diverse issues associated with servicing performing loans and non-performing loans.

CREFC Member Action Required

CREFC members of both the current HYDRA and Servicers Forums will receive an email request to make new forum selections based on their role in the industry and the descriptions of the forums as presented above.

Forum sessions at the January Conference will incorporate the new Alternative Lenders and High Yield Investors Forum, as well as the newly expanded Servicers Forum. To sign up for a forum, please click here. For any forum related questions, please reach out to either Lisa Pendergast or Kathleen Olin.

* Does not include (is not intended to replace) lenders/investors that are served by the Investment-Grade Bondholders, B-Piece Investors, Portfolio Lenders-Bank, Portfolio Lenders-Insurance Company, or Issuer forums

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CREFC High Yield & Distressed Realty Assets (HYDRA) Forum

February 28, 2022

Meet our leadership team:

High Yield Investments Sub-Forum

CHAIR	CHAIR-ELECT	PAST-CHAIR
Thanh Bui Managing Director Clarion Partners	Samir Tejpaul Principal   Square Mile Capital Investments Management	Abbe Franchot Borok Managing Director, Head of US Debt BentallGreenOak

Distressed Realty Assets Sub-Forum

CHAIR	CHAIR-ELECT	PAST-CHAIR
Niral Shah Credit Products Managing Director, Head of Servicing Operations Rialto	Andrea Helm Senior Vice President Midland Loan Services	Merrick "Rick" Gross Shareholder Carlton Fields

Together, Thanh, Samir, Abbe, Niral, Andrea and Rick form the “Leadership Working Group” for CREFC’s High Yield & Distressed Realty Assets Forum. Importantly this group sets the agendas and priorities for the Forum, as well as represents their constituencies on CREFC’s Policy Committee.

Key HYDRA Focus Areas

Increased competition

- Barbelling of portfolios with multifamily and industrial given challenges in other asset classes;

- Interesting and at times challenging lending structures such as ground leases and their impact on various financings;

- The scarcity of distressed opportunities during the pandemic, which can be attributed in part to stimulus funds and recovering asset and thus loan performance;

- Additionally, talent attraction and retention is a top concern. While pipelines remain strong, gaining traction on all the opportunities requires staff to meet the increased goals.

Looking ahead, leaders acknowledge that debt funds have hit their stride. To the good, growth opportunities remain plentiful for alternative lenders given the significant uptick in demand for bridge loans as the pandemic recedes. Challenges for high yield include the aforementioned talent retention, plus the challenges faced in developing ESG metrics and how to hold funds accountable. On the distressed side, managers are focusing on surveillance in order to protect credit, but see opportunities from the debt/equity side to provide capital when needed.

Forum leaders, including Thanh, Andrea, Niral and Samir who are part of the planning committee, are looking forward to exploring some of these topics further at CREFC’s March 31 HYDRA and Servicing Conference in New York City. Please click here to learn more.

To join the HYDRA Forum, please register here. For any forum related questions, please contact Kathleen Olin.

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