KBRA Credit Profile (KCP) attended Day 2 of the CREFC conference, which opened with remarks from outgoing chair Bob Foley, who reflected on a year where several key industry initiatives were launched, including the rollout of commercial mortgage-backed securities (CMBS) 4.0, enhancements to commercial real estate (CRE) collateralized loan obligation (CLO) investor reporting, and renewed focus on leadership development. He emphasized the importance of adaptability as the market transitions toward a more diversified capital landscape. Incoming chair Leland Bunch followed, highlighting the importance of member engagement in shaping regulatory policy, and the significance of cultivating the next generation of industry professionals. Both chairs framed the day’s programming within the context of broader market challenges, setting the stage for a candid conversation among senior stakeholders at the Industry Leaders Roundtable.
Industry Leaders Roundtable
Roundtable participants began by acknowledging the resiliency of capital markets in the face of economic and policy-related headwinds. A strong Q1 set unrealistic expectations, which have been recalibrated as the pace of new originations has tempered. Bridge lending remains highly competitive, with uncertain borrowers often exploring dozens of capital scenarios before closing.
Participants noted a continued shift toward five-year structures and bridge-to-bridge financing strategies, as traditional financing avenues remain disrupted. The increasing prevalence of maturity extensions, heightened servicing complexity, and borrower dissatisfaction with CMBS fixed rate structures were cited as growing challenges. With an overabundance of bridge capital in the broader financing market, participants noted that transitional loans are increasingly making their way into CMBS. The conversation touched on the comparative structural limitations of CMBS relative to alternatives such as debt funds and insurance capital, noting stronger competition for loans on stabilized assets.
Servicing complexity, structural friction, and opaque underwriting practices were flagged as ongoing pain points, particularly within the context of upcoming refinancing waves. While signs of optimism emerged—including multifamily supply constraints, growth in alternative assets, increased bank activity, and early signs of recovery in the office sector—the roundtable concluded on a sober note, emphasizing that remnants of the previous market cycle still need to be worked through.
Servicers Forum
The forum opened with an update on recent enhancements to the investor reporting package (IRP). Key improvements included addressing best practices for pari passu loans, standardized remittance reporting, improved appraisal subordination entitlement reduction (ASER) and waterfall reporting for non-recoverable loans, and an updated data dictionary under IRP version 8.4. In addition, panelists highlighted new quarterly supplementary reports for CRE CLO managers and enhancements to the periodic file.
The servicers reported that investor inquiries remain concentrated on questions related to operating statement analysis reports (OSAR), financials, property inspections, and workout strategies. Most inquiries are resolved within three days, although some can be delayed when borrower input is required.
Panelists observed that fraud in the market has grown more sophisticated, driven by technological advancements that make document manipulation easier. While most fraudulent activity occurs at origination, the panel acknowledged that it can also arise after origination—for example, through staged units during property inspections. In response, lenders are strengthening compliance protocols, enhancing internal controls, expanding training efforts, and adopting technology-driven detection tools. One panelist emphasized the importance of more thorough property inspections to identify potential fraud, particularly given the challenges of enforcing recourse carve-outs against repeat offenders.
Turning to the macroeconomic environment, panelists acknowledged persistent headwinds, bringing special attention to elevated insurance and tax costs as well as uncertainty around tariffs. One panelist noted that the full impact of changing U.S. tariff policies has yet to materialize, suggesting an additional layer of stress may be imminent. The panel also addressed loan maturity concerns, with one panelist estimating approximately 30%-40% of loans will be extended.
The discussion shifted toward the adoption of artificial intelligence (AI) for data scraping, financial and rent roll analysis, and commentary generation. While AI was generally recognized as a valuable tool, participants cautioned against overreliance, noting data security concerns and the technology’s potential to facilitate fraud.
The forum concluded with points of optimism and concern. On the positive side, panelists noted signs of increased transaction volume, the entrance of new players into the servicing space, and heightened activity in the CRE CLO market. However, they also emphasized that significant risks persist—including elevated office loan delinquencies, the potential for a COVID-like systemic disruption, and mounting concern over advancing on legacy trusts now concentrated in a handful of troubled assets.
CREFC Legislative & Regulatory Update
The luncheon session opened with remarks from Lisa Pendergast, president and CEO of CREFC, who welcomed attendees to the conference and extended gratitude to sponsors, planning committee members, moderators, panelists, and the dedicated CREFC staff. Ms. Pendergast acknowledged the contributions of outgoing board members and welcomed incoming leadership. She concluded her remarks with a grounded but hopeful assessment of the market, noting persistent inflation and ongoing policy uncertainty, while emphasizing the resilience of the CRE finance sector and the continued advancement of key initiatives such as the CRE CLO reporting effort, the NACREIF/CREFC Open End Debt Fund Aggregate, and updates to the IRP.
The presentation then shifted to the CREFC Legislative and Regulatory Update, which tackled pressing developments, headlined by the “Big Beautiful Bill,” a reconciliation measure that aims to consolidate tax and spending reforms. Panelists explored the implications of Section 899, a controversial provision that would grant the U.S. Treasury sweeping authority to levy punitive taxes on foreign investors in response to perceived inequitable treatment of U.S. companies abroad. Participants also examined the increasing influence of the executive branch over regulatory bodies, particularly in light of a recent executive order that embeds White House appointed liaisons within federal agencies. Updates on financial regulation included expected revisions to the Basel 3 framework, upcoming capital rule proposals from the Federal Reserve, and U.S. Securities and Exchange Commission (SEC) initiatives aimed at streamlining reporting requirements. The panel closed by emphasizing the need for continued industry advocacy, noting that policymaker engagement and data-driven input from members are essential to shaping a favorable regulatory environment.
Enlightened Hospitality: Leadership Lessons From Restaurants to Real Estate
The keynote luncheon featured a conversation with acclaimed restaurateur Danny Meyer, who recounted his four-decade journey in the hospitality industry. He shared pivotal moments and family advice that led him away from law school and into the food and service industry to open Union Square Cafe. Meyer emphasized how his early experiences in the industry revealed that great service alone was not enough to secure lasting guest loyalty. While technical precision—such as getting the right food to the right table—was essential, he came to understand that it was the emotional imprint left on guests (what he defines as hospitality) that truly distinguished a dining experience and underscored his increasing success in New York City. This realization became the philosophical cornerstone of Union Square Hospitality Group, going beyond the expected and creating moments of unexpected care that resonate long after the meal ends.
Meyer delved into his “Enlightened Hospitality” model, which places employees at the center of a virtuous cycle that prioritizes internal culture as the engine of exceptional guest experience. He stressed the importance of hiring individuals with a high “Hospitality Quotient” (HQ)—the innate desire to uplift others—and illustrated how this ethos has shaped businesses ranging from Shake Shack to the two-star Michelin restaurant, The Modern. Concluding his remarks, Meyer turned to the vital relationship between real estate and hospitality, urging attendees to see placemaking not solely as an investment opportunity, but as a civic responsibility to enhance communities.
B-Piece Investors Forum
Panelists provided insight into the current state of B-piece investing amid persistent volatility and shifting market dynamics. Rate stability was cited as a critical factor for restoring deal flow and borrower confidence. Panelists reported strong availability of B-piece capital and expressed cautious optimism for 2H 2025, contingent on greater market stability. Notably, five-year loans remain the preferred structure for borrowers due to rate sensitivity. The product is expected to remain in favor as brokers and lenders see opportunity in more frequent deal turnover, and borrowers feel more comfortable locking in rates on a five- versus 10-year horizon. While B-pieces tied to 10-year loans can be acquired at deeper discounts, panelists viewed them as harder to underwrite over longer time frames.
Discussion also focused on challenges surrounding the construction and execution of mortgage pools. Shifts in government policy have influenced underwriting standards, particularly for General Services Administration (GSA)-leased properties and industrial assets exposed to tariff-related supply chain risks. Recourse provisions are now more common and are seen as credit enhancements, although panelists agreed they are not a substitute for strong fundamentals. Office loans were identified as the most distressed asset class, now representing roughly 50% of specially serviced loans within some B-piece asset management books, followed by retail, hotel, and multifamily. For the latter, panelists highlighted the underestimation of multifamily operating expenses and insufficient reserve assumptions for capital expenditures.
Risk retention requirements were generally seen as neutral, with panelists indicating they had little impact on investment behavior as the market has largely adjusted. The session concluded with commentary from the panelists on their favorite part of B-piece investing. One panelist likened receiving a new tape to Christmas Day.
Risk, Reward, and Returns: How Insurance Capital Is Changing CRE Investment
The panel discussion explored the evolving role of insurance capital within CRE finance, emphasizing how traditional life insurance companies are strategically pivoting from conventional core fixed rate lending toward more opportunistic, value-add credit strategies. Concurrently, private credit firms and alternative asset managers are entering the insurance space by establishing or acquiring insurance asset management arms. This evolving dynamic is intensifying market competition and expanding the range of CRE credit offerings.
Insurance capital is increasingly deployed across a wide spectrum of CRE sectors, including those traditionally considered niche such as lodging and data centers, driven by objectives to enhance yields, align duration goals, and diversify portfolios. Panelists underscored that CRE debt—especially when paired with strong underwriting and sophisticated portfolio-level asset and liability management—offers compelling advantages over publicly traded debt instruments.
In the context of recent market volatility, a clear preference has emerged for private deals that offer control over the capital structure and provide flexibility in pricing risk. A notable strategy discussed was the replacement of repurchase (repo) lines with structured senior debt. Regulatory sensitivity remains high, requiring investment managers to navigate rating stability and capital charge constraints. As the trend of insurers partnering with or being acquired by asset managers accelerates, the insurance/CRE landscape is rapidly converging into a highly competitive, integrated model. Ultimately, the panel emphasized that managing insurance capital in today’s CRE market demands a nimble, unified approach grounded in regulatory expertise, credit discipline, and long-term portfolio construction.
Alternative Lenders and High-Yield Investors Forum
Against a backdrop of tighter bank capital regulations and a looming wave of $2.1 trillion in CRE loan maturities, the Alternative Lenders and High-Yield Investors Forum discussed how nonbank lenders continue to fill critical gaps in the market. Panelists agreed that senior warehouse facilities are currently setting the lending pace, because they attract lower capital charges than whole-loan books, are supported by lender and sponsor equity, and can be refinanced efficiently through CRE CLOs. The rebound in CRE CLO issuance is creating a positive feedback loop, allowing for the rapid recycling of warehouse collateral. That renewed liquidity is also luring some banks back into the bridge-loan market, although somewhat cautiously. Nonetheless, their renewed presence is already exerting downward pressure on spreads, and further participation could keep yields trending lower.
Participants mentioned that asset performance remains uneven across property types. The industrial sector—once a standout—is now experiencing a pronounced cooling as speculative development and trade-friction concerns have resulted in wider spreads. One panelist mentioned favoring smaller, infill industrial complexes over large, single-tenant buildings to mitigate lease-up risk. Multifamily remains the preferred sector, especially light value-add opportunities involving properties aged between 10 and 15 years. Regionally, there are policy concerns for gateway markets, while supply issues for certain Sunbelt markets may dissipate based on positive demographic trends and a reduction in the pace of new construction.
The office sector remains bifurcated, with trophy assets in key New York submarkets continuing to drive securitization, whereas older or transitional stock may face obsolescence if they are unable to obtain incentives to promote redevelopment. Luxury condominiums in New York and South Florida continue to enjoy strong demand, whereas middle market units generally require substantial presales to be viable. Hotel sentiment has shifted slightly negative as inflation and tariff headwinds have started to impact operating costs, exacerbated by potential disruptions in demand. Stabilized, cash-flowing lodging assets can access refinancing options, but ground-up construction is hard to justify until borrowing costs fall.
Underwriting standards have tightened across sectors, and base case scenarios now assume slower rent growth, higher operating expenses, and wider exit caps, reflecting lingering concerns over recessionary pressures and inflation risk. Despite conservative outlooks, the market continues to function as participants adapt to the recent short-term volatility. For lenders with stable capital and access to securitization outlets, panelists suggested that the next 24 to 36 months could present a particularly compelling window for risk-adjusted returns.
KBRA will provide a recap for Day 3 as the conference continues.