Five Key Themes From CREFC Miami 2026

Which CRE discussions energized the record-breaking and decidedly optimistic attendees at this year’s CREFC Conference in Miami? In this special edition of Dechert’s 4 Real podcast, Matt Armstrong, Jon Gaynor, Sam Gilbert, Stewart McQueen and Kate Mylod dive into the overall mood of the conference – which signaled resilience in the market despite geopolitical risks – as well as property performance, the issuance outlook for 2026, the continued rise of data centers, how private credit is filling gaps where banks and public markets are constrained and more.

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Jon Gaynor: 0:10

Hello and welcome back to the Dechert 4 Real podcast, where we discuss current issues and trends in commercial real estate finance. We aim to bring market commentary about developments, updates you can use, and maybe a little bit of answer along the way. I'm Jon Gaynor, a partner based in Dechert's Philadelphia office.

Sam Gilbert: 0:25

I'm Sam Gilbert, a partner based up in the Boston office.

Matt Armstrong: 0:29

I'm Matt Armstrong, a partner based in the New York office.

Kate Mylod: 0:32

I'm Kate Mylod, a partner also based in our New York office.

Stewart McQueen: 0:37

And I'm Stewart McQueen, a partner based down in Dechert's Charlotte office.

Jon Gaynor: 0:42

In this special episode, we have the whole team here to discuss five key themes from the CREFC Miami 2026 conference. But first, let's get 4 Real with the hosts. This came up a little bit at the conference this year because a lot of folks were doing karaoke at the Liquor Lounge. What is your go-to karaoke song? Kate, do you want to start?

Kate Mylod: 1:02

I don't know if I have a go-to one as much as I have a memorable one. Let's just say that there were a lot of law school socials where Bon Jovi's"Wanted Dead or Alive" was sung by yours truly. And that is not an easy song. And I do not have a good singing voice.

Matt Armstrong: 1:20

Man, that sounds difficult. I guess I'll go next. So, I really don't have a go-to karaoke song. I don't sing karaoke that much, and I don't have a great singing voice. So I think if I had to pick something, I think I would pick something by Oasis, maybe"Champagne Supernova" or"Wonderwall." Something that I could sing and that would sound good, and I think the crowd would get involved with.

Kate Mylod: 1:43

Oh, equally as easy as "Wanted Dead or Alive" with those choices.

Sam Gilbert: 1:48

And I don't really have a go-to either. And I did not sing karaoke at the Liquor Lounge this year, full disclosure, but if I had it, would have been probably"Friends in Low Places" by Garth Brooks, I think is always a crowd favorite.

Stewart McQueen: 2:01

So, first off, I don't voluntarily do karaoke. I'm usually pressured into it. But I guess my go-to song, if you call it a go-to song, is"Country Roads" by John Denver, because I'm from West Virginia.

Jon Gaynor: 2:16

Good answer. So I love doing karaoke, notwithstanding that I have a terrible singing voice. If it's not a professional setting,"Semi-Charmed Life" by Third Eye Blind is kind of a favorite. I was singing that at the FRE retreat a few years back, and I was like, "Oh, I shouldn't be saying these words in public among my colleagues." So probably like, if I had, you know, to do it again, I might have done "One Week" by Barenaked Ladies, which, still not perfectly, but it works.

Matt Armstrong: 2:44

I was there for that "Semi-Charmed Life," and I think it was amazing. You know, the speed of the lyrics. I never realized how quick it was, so you must have it all memorized in order to pull that one off.

Jon Gaynor: 2:57

Oh, yeah, no, totally could do it now if we wanted to drive away all of our listenership, but good, great. That counts as getting 4 Real with the hosts. Thank you everybody for participating. We're going to have to drag you all up to do karaoke. Maybe we could do a listener event or something in the future. But now, on to the main event. So we have Stewart, Sam, Matt and Kate here to discuss our five key themes from CREFC Miami 2026. So, we met ahead of time. We discussed, we divided up the topics. Stewart, do you want to kick us off with our first theme?

Stewart McQueen: 3:30

Yeah, sure, Jon, let's talk about the overall tone and mood of the conference. From my seat and my perspective, I thought this conference was more bullish than years past. The conference felt materially more risk-on in 2025 compared to prior years. The conversation tended to shift away from "Let's wait and see" and move more towards resolution, refinancing and deal execution. In the conversations in the hallways, I found it interesting that rate volatility wasn't really being discussed. The focus was more on spread discipline, structure and collateral selection than on absolute rate levels.

Jon Gaynor: 4:12

Yeah, over the past couple of years, I feel like we've been saying that the conference mood was cautiously optimistic. This conference was striking to me, because I felt as though we are being incautiously optimistic, which is to say there are a lot of, like, headwinds and potential geopolitical events and issues around the world and uncertainty around so many different things, people have just kind of, like, started to lean in on it and started to really just like, try to cut past all of the noise and focus on the things that they can control, which is great from the perspective of transacting and hopefully no more Liberation Days come up, you know, this year, although Liberation Day happened last year and we had a record year. So who knows?

Stewart McQueen: 4:56

Yeah, we only paused for a few weeks, right? But then we came back strong. So, you know, from our seats, like we see it, right? The deal levels, the pipeline, it's there. So I'm like the conference mood. I'm also bullishly optimistic, or whatever you want to call it, on 2026

Matt Armstrong: 5:13

Yeah, I think at one of the panels, one of the guests said their takeaway was that it was resilient and stable, despite geopolitical risks, which I thought was pretty good, so I wrote that note down.

Sam Gilbert: 5:20

I like bullishly optimistic Stewart, I'm going to write that down and use it again. But Jon, to your point, like, the takeaways. I've had a couple of calls since getting back from the conference on a couple of deals, and everyone had the same feedback, right? Everyone was sort of ready to go. And I think this is one of the conferences where people came back sort of energized and bullish and picked up that enthusiasm that everyone else had at the conference. So, we'll see how 2026 carries through on that, hopefully.

Matt Armstrong: 5:51

And it definitely seemed like there was more people at the conference this time than in prior years. I think they did say that there was a record number of people this year, I think over 2,400. But even, you know, at the conference itself, but you know, like outside of the conference, people having meetings, people going to lunches, it seemed like there were more people down in Miami than in years past.

Kate Mylod: 6:13

Well, that's what I was going to comment on, too, Matt, you know, just anecdotally, around the edges, right? The swarming of people, it almost felt that there were as many people present in town for the conference as there were actually registered at the conference, kind of doubling the mass of navy blue and black and khaki taking over Miami Beach, which was actually fitting with how the weather was while we were there. But even just noticing the area establishments and the number of conversations happening throughout the course of the day, across the street, up a few blocks in all the local hotels, you know, the conference wasn't just at the Loews. It really was everywhere in that space.

Stewart McQueen: 6:52

Even shockingly, had it not been raining, we probably would have noticed even more people out about than we saw. I'll also go to say the the uncautious optimism versus bullish optimism... is that now a fight between me and Jon? Are we going to have a poll, or how we're going to... I like Jon's better.

Sam Gilbert: 7:10

As long as we're not talking about what inning we're in anymore, I'm happy to talk about anything. So.

Kate Mylod: 7:16

Or as long as we see who's left standing at the end of this podcast.

Jon Gaynor: 7:21

All right, so I think that was a good discussion on our first theme, which was the overall, you know, bullish mood. Kate, do you want to take us to our second theme?

Kate Mylod: 7:31

Sure, our second theme circles around, you know, property performance, and that the bifurcation that sort of permeates looking at property performance. And a couple of general takeaways before we delve into some specific asset classes. Some places are doing really, really well, and we're seeing capital being attracted to those areas. Not surprising. You've got your Dallas, your Miami, your Manhattans and other places aren't so much. Following from that, it's not surprising that CMBS data shows that stress is concentrated, as opposed to being uniform and across all the deals in the sector. So, you kind of have this pocketing that's happening across the industry. Let's look at a couple of specific asset classes, right? We always talk about office at these conferences, as we have for the last five years or so. I don't think anybody would dispute the fact that it still remains a quite challenged property type. Delinquencies have been reported on CMBS deals, you know, in the northern high teens range. And I'm seeing this in my own practice. One of the observations that was shared at the conference, which is that when it comes up to refinancing, and there's been a wave of maturities that has come through year over year, refinancing can go one of two ways: Either they're super smooth and you get them done, or they're quite rocky and a lot of them don't get to the finish line. In some stats, it's reporting that as high as 50% of refinancings are not able to close on office deals, and a lot of that depends upon - surprise, surprise - the leasing momentum, you know, as well as the support that you're getting from your borrower sponsor. Speaking of leasing, right, again, sort of master of the obvious, but I think these things really start to matter during times like this. Longer lease terms are the ones that are attracting sort of the greatest underwriting credit. They improve finance ability. Sort of this WALT concept, the weighted average lease term. If it's greater, that's going to be better for the property, whereas short WALTs are going to increase your refinancing risk. We talked about a couple of the lead markets. You know, Dallas, Manhattan, Miami and Class A assets in those markets are still doing really well, which, again, not a surprise.

Jon Gaynor: 9:56

One thing that I thought was interesting, so we had one of our guest speakers Scott Galloway, I'm a huge fan. I've copied his haircut. He's a big podcast guy, whatever, but he predicted that office would be doing much worse than I think resonates with the rest of the real estate industry. I think return-to-office mandates are generally holding up. I think that there is real benefit and advantage to folks having people in the office together and working together. But, you know, more and more, I think office is becoming somewhat of a luxury item, in the same way that, like, luxury and experiential retail really took off where it's, like, offices that are like nicer, that have good amenities, that have those sorts of features, those are really drawing a lot of attention, and kind of your commoditized office, your suburban office, is really, like, suffering. And to me, you know, that was one point when in Scott's presentation where I was like, "Ah, he's not a real estate guy. And that's a shame." I don't know if anybody else had that reaction.

Kate Mylod: 10:56

That's totally like, a fair, legit point. Like I actually, when I was down in Miami, went to go have lunch at a client at their offices a little bit north of Miami, and they've created office space that, not only is it collaborative for in-person people working together, they have an amazing sort of dining experience for their workers. And I think they've got people in five days a week, because it's new. It's fresh. It takes care of all of their needs. It's quite luxurious going there.

Matt Armstrong: 11:29

One thing I heard at the conference was there will be some issues with some of the loans that were originated from the 2021 to 2022 period. So, that certain vintage of loans just at the time when interest rates were very low post-COVID. And then, you know, as interest rates then rose significantly afterwards, and I guess spreads kind of got wider. It's making those specific vintage of loans just more difficult to refinance as they're coming up.

Stewart McQueen: 11:58

Yeah, I also heard that, Matt. You know, the interesting thing is that this maturity wall that some of these borrowers are facing, the question is going to come down to, are they willing to put more capital into the project? I mean, some of these properties still aren't stabilized, or they've lost major tenants, and they're in a period of transition, so to speak, and it's, you know, can they refi at the right rate and then also put additional capital in? Because that, to me, is one of the only ways they're going to get refi if they have to bring more money to the table.

Kate Mylod: 12:29

That's actually a great segue. Stewartt, sort of into the second asset class that I wanted to touch upon. Sort of fell under this umbrella of, sort of, bifurcation and how we're doing multifamily, right? And I can say personally, from my own experience, and this was definitely talked about thematically at the conference, you know, it's very helpful to lenders as they're approaching a refi or even plugging some of my own practice, a workout or a modification, if the sponsor is willing to show up with some extra capital, right? When you're able to write a check and continue to invest in the property, I think there's a lot more leeway with what you're going to get from your refinancing lender, from any kind of modification or workout that you need, you know, into that and you know, whereas multifamily was such the darling, you know, 21-23 and a very high asset class, we've seen some of the reality set in. And going back to what Stewart was saying at the top, about how, you know, there's sort of been this acceptance and moving on, I think we are seeing that in the multifamily space, people appreciate, even if they don't like, the realities, that they are not seeing the demand in some of the areas where they thought there would be demand. You've seen exorbitant expense growth across the board, particularly around the cost of supplies and materials for maintenance of these properties, and then you've seen concessions have to really increase to continue to get people in the door. So, again, this is one of those places where, if you're in one of those attractive markets, it's a lot easier to keep these multifamily properties up to modern amenities. And you know, with the tenancies in place.

Jon Gaynor: 14:09

Yeah, and those costs can range across the board. I think, you know, in the Sun Belt coastal regions, insurance premiums are skyrocketing. I saw one report that said that Florida, in some places, experienced a 50% year-over-year increase in insurance costs, and that we've seen insurance premiums go up by around 30 to 40% nationally over a two-year period. And those kind of increased costs can really hurt a deal that penciled in a different environment, and keep it from penciling in the current environment, or make the refi impossible without some sort of like infusion of equity, like you were saying earlier, Kate.

Kate Mylod: 14:49

Well, and I think that's also paired with the fact, you know, sort of these increased costs across the board, you know, and then you put that with the fact that you haven't seen the aggressive underwriting on rents come to fruition, you know, really put some of these sponsors of multifamily properties in a in a tight bind. So, that was definitely a topic of conversation, you know, both within and without the conference.

Matt Armstrong: 15:14

And I think there was also talk just, generally, about demand for multifamily housing that, you know, there is a structural deficit nationwide of affordable housing units. That's the type of housing that we would like to see more of built, whether that's by manufactured housing or built to rent or affordable multifamily. There's different ways that it can be done, but that there is that structural deficit nationwide of those units, and how the market can meet that.

Jon Gaynor: 15:44

There's something like, apparently, a three-10-million home deficit that just ... we stopped building after 2008 at the same clip as we did before, maybe seeing how the market responds to that and addresses the supply side of the housing cost crisis. We didn't talk about these, I guess maybe there's not a ton extra to say before we move on. But itseems like retail, having undergone its own apocalypse in years past, is relatively stable. Like, we didn't keep building more shopping centers and things and, so, vacancy has been tight. Delinquency rates seem manageable, especially compared to office. So retail, and retail might actually point to a way for office to resolve itself, and then industrial, like, everybody's happy with industrial generally, like, I feel like there's a lot of pluses there.

Stewart McQueen: 16:34

Yeah, I agree with you, Jon, on the sentiment about retail, but I don't know if ... walking around Miami street-level retail looks like it's suffering in Miami. I don't know if you noticed all the closed shops and things of that

Sam Gilbert: 16:45

Stewart, I think you're right. I think there nature. definitely was, anecdotally down there, you know, a lot of shops closed. But Jon, I think retail has sort of fallen off of the radar for some people as the current four-letter word. Its time has passed and and we'll see where it goes from here.

Jon Gaynor: 17:02

All right, I think that closes out the second theme, Matt, I think you've got theme three. Do you want to talk about that?

Matt Armstrong: 17:10

Yeah, for this theme, I'm going to talk about the issuance outlook for 2026 and I guess we're coming into this off of a very strong 2025 and I think most of the people at the conference see this high rate of issuance just continuing to go into the future, into 2026. I think people were forecasting about a 10% increase in 2026 over 2025 and they think that that will be driven primarily by SASB, CMBS and CRE CLO activity. SASB CMBS and CRE CLO were bright spots in 2025. I think SASB CMBS was way up from 2024 and CRE CLOs were really starting to catch on toward the end of the year, and I think there's an expectation that in 2026, SASB CMBS will continue to issue at the same pace that it was issuing in 2025 and that CRE CLOs will even become more active. We had a very strong January in CRE CLOs. Two deals priced before CREFC with more coming after CREFC. And if that issuance level can keep up all year, it will be a banner year for CRE CLOs.

Stewart McQueen: 18:21

I think, Matt on that front, on the CRE CLO, I think always a good indicator is new issuers coming to market. And can't announce it here, but we do know of several new issuers, new sponsors, who are going to come to market with this product. So that's that has me bullishly optimistic on 2026 on the CRE CLO front.

Matt Armstrong: 18:40

Yeah, and one of the things that was mentioned at the conference about CRE CLOs is that, you know, as issuance is increasing, they now need more investors to come into the market. And so, what they're looking for are crossover investors, possibly from the corporate CLO market. If we could get them interested in investing in CRE CLOs, that would be great, just so it's not the same investors on every deal, and then there's a wider group of investors that are investing in this product.

Jon Gaynor: 19:08

This is a kind of point of, like, just curiosity, I mean, because I didn't really hear as much talk about it at the conference this time, but didn't the reporting package for CRE CLOs get made public? Has that been updated? Is that being implemented? Like, are there things that we're doing to help encourage these crossover investors to come in?

Matt Armstrong: 19:26

Yeah, there have been a few structural improvements that have been incorporated into CRE CLOs over the past year, mostly all driven by CREFC. The first was Annex A tape lines, right? So, anytime there's a new loan put into a deal through reinvestment, the sponsor is now supposed to provide, at least in new deals, a new tape line for that asset so that it can be modeled like the other loans in the deal. And then there is a new CREFC CRE CLO, CMDR report. And this is basically an Excel file that goes alongside of the quarterly business plan updates that sponsors have been providing in CRE CLOs. And those quarterly business plan updates are all on specific forms specific to each sponsor. And the idea of the CREFC CRE CLO CMDR data supplement report is that it would be an Excel spreadsheet that kind of pulls a lot of the information that's already in those reports, and then that info is provided to market data providers, and they're able to use that to model the deal on a going-forward basis, as opposed to, you know, just the information that you get at the original outset of a deal.

Jon Gaynor: 20:40

And just in case my mom is still listening, because we had a lot of acronyms so far. Is CMDR Collateral Manager Data Report?

Matt Armstrong: 20:48

Yeah, it stands for Collateral Manager Data Report supplements. So.

Sam Gilbert: 20:53

I think Matt set a podcast record for most acronyms in five minutes. We'll go back and look at the recording, but that was rapid-fire acronyms, Matt. Great job.

Matt Armstrong: 21:01

I don't know if that's a record that I want to have.

Jon Gaynor: 21:04

I don't know if you heard the same things, but, like, anecdotally, there's a lot of insurance money out there chasing investment opportunities right now, and CRE CLO debt seems like a really good place to put it because it's already rated. And, like, you can, you can get a Triple A rating without having to worry about any of the, kind of, like, upper-tier structuring that goes into an equity investment for example, you know, playing off of our last episode with our partner Ross McConnell on rated funds. So Matt, I think you were also going to talk a little bit about what we expect about the agencies.

Matt Armstrong: 21:37

Yeah, before that, let me just follow up on conduit CMBS. Conduit CMBS, I think, is expected to be, you know, just kind of maintain where it was last year. And what I heard from the conference, the main takeaway there was just that we would need 10-year and five-year fixed rates to drop in order for conduit issuance to really take off. And with those rates being where they are, it's expected that conduit issuance will be relatively muted next year. On the agency front, I guess the main elephant in the room that was not talked about at the conference at all, really it was basically avoided, is the privatization discussions for Fannie and Freddie. They basically just moved past that, since it's all dependent on whatever the president decides to do. At least things that the conference focused on were that the FHFA set the 2026 multifamily caps at $88 billion per GSE. That's up from last year, so kind of increasing the amount of loans that each GSE will be able to buy and then securitize. So that will increase the amount of multifamily MBS paper that's out there. There's another interesting follow up to that, which was just that President Trump came out recently and said that the agencies are going to be buying up to $200 billion worth of mortgage-backed securities. So, presumably, they'll be out in the market buying that up, and they'll now have a retained portfolio like they used to have back in the day, and that should help to lower spreads on agency multifamily bonds. And if it lowers spreads on agency multifamily bonds, some of those savings should hopefully get passed through to borrowers. And if it gets passed through the borrowers, it will lower the amount that they have to pay on their mortgages for either single family homes or multifamily homes.

Sam Gilbert: 23:30

President Trump is certainly focused on housing affordability at this point. That's sort of is one of his new focal points. So, it'll be interesting to see what what comes out of that, and what direction it sends us in.

Jon Gaynor: 23:42

It's interesting to me that the rate volatility itself is not as much of a concern. I expect this year we're going to see tightening on the Fed funds rate and maybe even material tightening on the Fed funds rate, but I'm conscious of the fact that if we artificially depress those rates, that the five year and 10 year are going to make up the difference, and that we might not actually see meaningful cost savings on our 30-year mortgages, and hopefully no 50-year mortgages. Although, who knows? I feel like that direction was abandoned, maybe I'm missing cues.

Matt Armstrong: 24:15

I hope so, because you make a 50-year mortgage, all that's going to do is increase the amount of proceeds that people have access to to buy homes. It's just going to drive the price of homes up without fixing the supply side of the equation, which I think really seems to be the big issue.

Jon Gaynor: 24:33

All right, that was great. Matt, let's talk about our fourth theme. Sam, I think this one is with you.

Sam Gilbert: 24:41

Thanks, Jon. I was just going to touch briefly on data centers. Everyone's sort of talking about them, whether it's at the conference or reading the paper or watching TV. You know, Jon, you always talk about sort of your mom is listening, like, my mom even knows what a data center is. So, I think they're becoming very mainstream, but they're discussed now, I think, less as kind of alternative real estate, and more as a hybrid between real estate and infrastructure. A figure I heard tossed around a couple of times was that we were going to need up to a trillion dollars in long-term investment here to support the AI-driven data center growth that we've all been hearing about. Obviously, there are some issues with getting there, right? I mean, power availability is a huge issue, often more critical than the location or the tenant credit alone. But power obviously drives these. Water does as well. Another issue that folks have is tenant concentration, and there's only a couple hyperscalers out there, right? So, the tenant concentration risk is pretty elevated, and a lot of facilities rely on just a small number of these hyperscalers. And obsolescence is a risk that I think people are starting to talk about, you know, you take years to build these data centers, and by the time you get it built and ready to go, the chips you're putting in there, or the cooling requirements, the power, you know, is it going to be obsolete? Are these all going to be in space in three years, and everything we built on the ground is going to be out of date? So, it's an interesting place to watch. I mean, we've seen a lot of different financing structures here, from ABS-style executions, large SASB deals, you know, CMBS deals, you know, you bring in some of the infrastructure. So, we're seeing a whole lot of different structures here with this asset class, but certainly something to keep an eye on, and I think something over the next few years that's really going to dominate the space, sort of like retail did during COVID and office has. But I think data centers is really something to focus on.

Kate Mylod: 26:37

But it seems like in looking at data centers and also looking at, you know, sort of realities like AI, there's a bit more temperance now with the the outlook on this type of investment, as well as, you know, this type of, for lack of a better word, you know, calling AI a tool, right? Like, I think, at the contrasting to CREFC at the top of 2025, where, you know, AI was really a large part of the conversation. And, you know, people were wondering just how transformational it might be, how much it might render unnecessary. I think now we're seeing people recognize more the productivity value of AI and its ability to enhance and enable and allow us to do things more efficiently. But I heard less from our speakers and from scuttlebutt around the conference around the sort of AI transforming, you know, kind of what we do in our day-to-day jobs in any more material way than that. And I think also looking at data centers too, you know, it's been a very explosive growth area, and there's been a lot of deals that have been structured in all sorts of creative ways using data centers. But I think people are looking at that asset class very closely the deeper we get into it.

Jon Gaynor: 27:56

And it's funny, because I love AI, I think that there is real benefit for it to take some of the grunt work out of, like, day-to-day knowledge work, but I haven't seen AI do judgment work in the way that would meaningfully impact the day-to-day of folks like us and our listeners who are making judgment calls and, like, doing more than just kind of like spitting out the data, but deciding on it and coming with an outlook for the future and all of that.

Sam Gilbert: 28:26

And I think the issue, though, Jhn is, like, I think there's a great discussion to be had about AI and whether it's going to cost a bunch of jobs or produce a bunch of jobs, right? Like, that's a whole great discussion. And I I'm kind of in your camp that I think it's a great thing, we should embrace it, but I think that bleeds over. And people look at data centers and they say, "I want to invest in a data center, because I think AI is going to take off," right? Like the data center is just the building that's holding these chips. It's not AI, right? It's a whole different thing. AI is the future, so I'm going to put money in a data center. Like, there's a disconnect there.

Jon Gaynor: 29:03

And there are different kinds of data centers There's also the size of everything. I wouldn't be doing different kinds of things, right? Like, cloud based data centers have been a thing for quite a while now, and that cloud movement hasn't really changed in terms of trends inside of computer architecture, keeping our world going. Like, more and more goes into the cloud, and, like, outside compute by these cloud providers and these hyperscalers and whatever, like, that is going to be remaining a thing. It's just whether or not the investment supporting, kind of, AI growth, you know, is supportive. And who knows? Maybe in like 20 years, instead of data centers on the ground, we have a bunch of like orbital, you know, chip stations around the planet, like a Dyson sphere around the earth for data. surprised if we see this footprint shrink, whether it's in space or on the ground. All right, that was a really good discussion on that. Thank you. Sam. So I have our final theme, which, in general, is just private credit and back leverage. So, private credit has always kind of been a thing in commercial real estate. We've had debt funds, lending. But the real trend comes at the intersection of a couple of different issues. One is that a lot of regional banks are pulling back the amount of lending that they're doing and that there's creating space for debt funds and mortgage rates to capture more and more of that market. You also have banks seeking efficient capital treatment, which back leverage facilities like repurchase agreements and the like give them. And so now, you see a lot of growing interest in private credit and back leverage in particular, and I think some forecasts have it doubling over the next couple of years. I'll say, you know, from my conversations from folks at CREFC there are tons of new banks entering the space in the coming year. They have massive allocations for repurchase facilities, you have existing players all communicating that their allocations for repurchase facilities are going up, not down. And so, not only will you see new capital for new facilities coming out in the next year, but you'll as you'll see old facilities paying off, or things getting securitized in CRE CLOs, capacity opening up to increase lending further. So, you got a little bit of a virtuous cycle going on there, and all of it comes together to say that, like, it's a really hot area and one where there's a lot of energy and buzz.

Matt Armstrong: 31:35

I thought part of the rationale for this move where there's starting to be more and more back leverage is that the regulatory capital treatment of the back leverage facility is actually better than regular underlying collateral. And so, therefore, there's more and more banks trying to get into this. And we've seen that. We've seen a lot more banks trying to get into the space in CRE CLOs, you know, you see them come in. And the way to really get on deals as the banker, in addition to having the broker dealer, is to be the repo provider. You know, they provide repo lending for all the mortgage loans, and then whichever one usually provides the most ends up being the lead left placement agent on the deal. So it's a way to kind of get in to that market.

Jon Gaynor: 32:21

Yeah, and that capital treatment point is right, Matt, and I think more and more people are recognizing it. The other element, too, is that, because there's so much competition between banks, we're seeing meaningful spread compression and some kind of what I'll call "structural compression" across the space. Like, more people are allowing for defaulted asset buckets or non-performing asset buckets, even foreclosure in the context of a regular-way repurchase facility where, go back 10 years, that was basically unheard of, having a documented right for a defaulted asset to sit on a repurchase facility for anything longer than, like, a capital call period. So I think you're absolutely right. The other element just to think about here is that we've had a, like, absolute explosion in the number of debt funds and mortgage rates and the like that are playing in the space. And, you know, you look at the commercial mortgage alert, and you look at the list of lenders in the market, the list is has really grown in size over the last couple of years. Some people I was talking to the conference were wondering whether or not we're going to see some compression or consolidation there? Which is to say, like, do we need so many debt funds out there? Do we need so many people chasing deals, because it's not just the banks that are competing, but it is these shops who are trying to, like compete on individual loans that they're making. And, you know, that's got to create some meaningful pressure, too, on the collateral side.

Stewart McQueen: 33:56

Yeah, John, I will say, I think the private credit coming in, or the more of it coming in, and then the more willingness for the banks to provide the back leverage creates a lot of bullish optimism for me as an attorney in a law firm.

Jon Gaynor: 34:06

We certainly have a big role in making sure that it stays successful. I think that one theme that people talked about repeatedly was that structure and discipline matter more than ever, and, you know, making sure that we are avoiding the kind of fraud cases like we're alleged in the Western Alliance and Zions Bank situation are going to continue to be key focuses of market participants in the coming year.

Stewart McQueen: 34:35

That's a great point. Jon,

Jon Gaynor: 34:38

OK, thank you for joining us for another episode of Dechert's 4 Real podcast. If you have any thoughts, please share them with us at our email inbox, real podcast@dechert.com. And if you like what you heard, give us a five-star rating and tell us your go to karaoke song on whatever platform you found this on. This episode was hosted by Stewart McQueen, Sam Gilbert, Matt Armstrong. Kate Mylod and me, Jon Gaynor. The whole team produced it. Production Support is by Kara Ray, Mallory Gorham, Alyssa Norton, Peggy Heffner, James Wortman and Jacob Kimmel. Bonus kudos to the team for gathering on a holiday to pull this episode off on time and quickly. Our editor is Andy Robbins of Audiofile Solutions. Thanks for listening, and we'll see you next time on the Dechrt 4 Real podcast. OK. Dad joke time. I'll get us started. I saw an ad for a radio that said "Radio for sale, $1 volume stuck on full." I knew I just couldn't turn that down. I'm killing you guys, sorry. Or"that's a sound deal."

Kate Mylod: 35:41

I hope that our audience can hear the exasperation in our faces with just how bad these are.

Stewart McQueen: 35:47

That was the first dad joke that I didn't even chuckle because of how bad it was.

Kate Mylod: 35:52

All right. Well, I think continuing in that theme, I will say, What did death say to the calendar?

Jon Gaynor: 35:59

What?

Kate Mylod: 36:00

Your days are numbered.

Jon Gaynor: 36:02

All right, that joke is "week."

Kate Mylod: 36:04

It just makes me go"uhhh" instead of chuckling.

Stewart McQueen: 36:09

I can't unhear these.

Kate Mylod: 36:12

All right. Stewart, you go.

Stewart McQueen: 36:14

All right, I got one. How does a penguin build a house?

Jon Gaynor: 36:18

How?

Stewart McQueen: 36:18

Igloos it together.

Jon Gaynor: 36:21

Oh, okay,

Matt Armstrong: 36:22

That's awesome.

Sam Gilbert: 36:23

That's the best of the bunch so far.

Kate Mylod: 36:24

Think that's it. Let's quit while we're ahead.

Stewart McQueen: 36:27

I'm the winner?

Kate Mylod: 36:30

Bullishly optimistic. Yes.

Sam Gilbert: 36:31

Win or lose, or whatever you want to call it.

Stewart McQueen: 36:33

My daughters hate my dad jokes, so if I go home and tell them that I won the dad joke on the podcast, they may not talk to me.

Jon Gaynor: 36:39

t's an indictment of the rest of us, really.