Moody's Corporation · NYSE:MCO
Moody's — In Conversation on CRE webinar (August 2020)
15 slides from Moody's's conference presentation, Aug 11, 2020
Slide 1: Distress in the CRE Lending Markets: Theory and Practice
Distress in the CRE Lending Markets Theory and Practice Victor Calanog PhD FRICS August 11, 2020
Slide 2: An Historic Recession, An Unprecedented Time
An Historic Recession, An Unprecedented Time Real GDP, annualized quarter/quarter growth rate 20.0% 10.0% 0.0% -10.0% -20.0% -30.0% -40.0% 2018Q4 2019Q4 2020Q4 2021Q4 2022Q4 Baseline Recession Protracted Slump Sources: BEA; Moody’s Analytics Distress in the CRE Lending Markets 2
Slide 3: The Labor Markets Through July
The Labor Markets Through July Job Creation and the Unemployment Rate 5000 24.0% Monthly Net Change in Employment Unemployment Rate Yearly Wage Growth NAIRU 0 20.0% Wage Growth and Unemployment -5000 16.0% Payrolls (Thousands) -10000 12.0% -15000 8.0% -20000 4.0% -25000 0.0% Jan Jan Jan Jan Jan Jan
Slide 4: Distress in the CMBS World
Distress in the CMBS World Share of Loans Mentioning ‘COVID-19’ in Servicer Notes, by Property Type (UPB approximately $41 billion) Share of Relief Requests Received, by Property Type (CWCapital, UPB $8 billion) Sources: CW Capital; Moody’s Analytics Structured Finance Portal Distress in the CRE Len
Slide 5: Where Is Distress? It Depends…
Where Is Distress? It Depends… Source: Moody’s Analytics Structured Finance Portal Distress in the CRE Lending Markets 5
Slide 6: Retail: Evolution, Accelerated
Retail: Evolution, Accelerated Sources: U.S. Commerce Department; Moody’s Analytics Distress in the CRE Lending Markets 6
Slide 7: The Evolution of Office Will Take Time
The Evolution of Office Will Take Time Sources: Moody’s Investors Service, Moody’s Analytics, Compstak Distress in the CRE Lending Markets 7
Slide 8: How Much Time, Exactly?
How Much Time, Exactly? Sources: Moody’s Investors Service, Moody’s Analytics, Compstak Distress in the CRE Lending Markets 8
Slide 9: Let's Assess Risk In a Nuanced Way
Let’s Assess Risk In a Nuanced Way Sources: Moody’s Investors Service, National Bureau of Economic Research (NBER) Distress in the CRE Lending Markets 9
Slide 10: Stress Will Depend on Focus and Footprint
Stress Will Depend on Focus and Footprint Total MF/CRE Mortgage Debt Outstanding – and the Life Cos Total and Multifamily Debt Outstanding: $4.66 Trillion Other, 6% Multifamily, Lodging, 3% 28% Industrial, 13% Retail, 22% Office, 28% Sources: Federal Reserve, latest data available as of June 2020. D
Slide 11: Transaction Activity Down (Again)
Transaction Activity Down (Again) Compare and contrast this with 2008-2009 $120 $100 Transaction Volume (In $Billions) $80 $60 $40 $20 $- 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Apartment Office Retail Industrial Source: REIS, Real Estate Solutions by Moody’s Analytics
Slide 12: Expected Originations Volume
Expected Originations Volume Multifamily + CRE issuance volume, by year $700,000 $600,000 Other $500,000 Life Co. Other $400,000 Life Co FHA Millions FHA Freddie Freddie $300,000 Fannie CMBS Fannie Bank $200,000 CMBS Bank $100,000 $0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2
Slide 13: Cap Rate Forecasts
Cap Rate Forecasts Implied Value Declines for 2020 13% » Given major economic distress, Apartment Office Retail Industrial Hotel expect cap rates to rise over the 12% course of the year. Implied value 11% declines will differ across 10% property types: ~7% for 9% apartment, ~9% for industrial, 8% ~1
Slide 14: Contact Us
Contact Us: John Toohig Head of Whole Loan Trading Raymond James John.Toohig@RaymondJames.com Victor Calanog Head of CRE Economics Moody’s Analytics | REIS info@reis.com
Slide 15: Distress in the CRE Lending Markets
© 2020 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liabilit
Moody's — In Conversation on CRE webinar (August 2020) on 6ix