5 Questions with MetLife Real Estate Investors’ Mark Wilsmann
- Feb 03, 2016
As head of real estate equity strategies and a managing director for MetLife Real Estate Investors, Mark Wilsmann has helped the company maintain a leading position among life companies in commercial mortgage lending.
Wilsmann recently spoke with MHN about the state of the industry and MetLife’s place in it.
MHN: What do you expect from investors for 2016?
Wilsmann: Many investors are cautious as a result of the pullback in public equities and widening spreads in fixed income, but still view commercial real estate as a relatively attractive place to invest. I expect that 2016 will be another active year for transactions, with pricing continued strong for high quality core deals, but with tougher conditions for transitional properties as investors pull back from risk.
At this stage of the cycle, we think real estate is priced fairly across primary and secondary markets and across Class A and Class B properties. The arbitrage opportunities that were available earlier in the cycle are generally not there anymore. That’s not to say that all properties will be priced to perfection. We expect that supply and demand for product will be more balanced this year than in recent years, with more sellers coming to the market. From that perspective, buyers will have more leverage this year.
MHN: What’s expected for multifamily finance? Are any changes ahead regarding such areas as the availability of financing for new development, stabilized properties and value-add opportunities, for instance?
Wilsmann: All the sources of debt are active in the market, including Agencies, Banks, Life Companies, CMBS and debt funds. New regulations from Dodd Frank and Basel are impacting the traditional lenders and CMBS, generally keeping proceeds levels down. Debt is available for value-add and development, but it will continue to take more equity to get deals done. Lenders generally dialed back risk-taking in the last six months of 2015, and we expect that trend to continue in 2016.
MHN: Are any capital sources likely to become either more active or less active lenders in 2016? What effect will that have on the lending climate overall?
Wilsmann: Banks and life companies will be active in 2016, but will remain disciplined in part because of caution about a potential downward turn in the market, and in part because of new capital requirement resulting from the new regulations. As risk retention rules become effective late in the year, CMBS pricing, which is already wide compared to bank and life-company balance sheet loans, will widen further. Unlike conditions prior to the global financial crisis, when CMBS was often the most efficient source of debt capital, in the near term, it is likely to be the most expensive. But it is still viable for large single asset deals and properties ‘outside the box’ for life companies and banks.
MHN: What is the company working on now? What are you excited about in the year ahead?
Wilsmann: We are working on a variety of strategies, for both our institutional clients and the MetLife general account. Though it may not sound glamorous, what I am most excited about this year is taking advantage of rising rents and continued healthy demand in many of our markets to drive NOI growth. We will be very selective in our acquisitions this year, but we will be focusing on asset management to lock in attractive income for our investors.
MHN: What do you think is the most important thing that investors need to be aware of in today’s multifamily environment?
Wilsmann: Investors need to be aware that the dramatic rent growth we have seen over the past several years will moderate, and come back down to earth. But that doesn’t mean that multifamily won’t continue to be an attractive place to invest. Just that the double-digit total returns that we have enjoyed will likely come down to the high single digits. But that is still awfully attractive compared to the paltry returns investors are faced with in many other sectors.