Lopez: Industry Must ‘Capitalize on Opportunities’ to Build Success

SAN DIEGO–A little less than 30 years ago, a group of 200 commercial real estate professionals met in a small hotel across from the airport here for the Mortgage Bankers Association’s first Income Property Conference.

Today, that conference–now the MBA Commercial Real Estate Finance/Multifamily Housing Convention & Expo–is the second-largest event MBA puts on yearly, attracting several thousand commercial real estate professionals for three-plus days of policy discussions, trends and networking.

“Our industry has played a significant role in the growth of this city and countless others across the United States, and, indeed, throughout the world,” MBA Chairman Rodrigo Lopez, CMB, said here yesterday. We touch every community, every family. We contribute to the fabric of our nation where families live, work and play. We provide diverse capital resources for office buildings, retail stores, industrial centers and our homes, whether rented or owned. And as MBA members, representing all facets of real estate finance, we have definitely enabled this growth.”

Lopez, executive chairman of Northmarq Capital, Omaha, Neb., said now is a “great time” to be in the commercial and multifamily real estate finance businesses. “As we look forward, we must capitalize on the opportunity to build on this success through our unified partnership and single vision for the future of our industry,” he said. “Working together, we have the means and opportunity to advance real estate finance in America to the benefit of our industry, the economy, businesses and households.”

Lopez outlined a blueprint for the future, focusing on three critical areas:

–Effective flow of capital while maintaining the right regulatory balance;

–Transformational technology; and

–Achieving meaningful diversity in our industry.

On regulatory reform, Lopez noted ach capital source is subject to distinct government rules and regulations. “The complexity of regulatory frameworks leads to overlapping rules, which negatively impact the entire commercial and multifamily real estate finance industry,” he said.

For example, the core purpose of the Home Mortgage Disclosure Act is to mandate reporting on consumer lending, rather than business-to-business lending on commercial and multifamily real estate. Lopez said the recently expanded HMDA rule, however, imposes “considerable” reporting obligations on a wide range of institutions that provide capital for multifamily real estate assets.

“This regulatory expansion arguably presents significant concerns across the commercial/multifamily sector, without delivering a corresponding public policy benefit,” Lopez said.

Lopez added that other regulations present challenges because they are developed in isolation within bureaucratic silos that end up having unintended effects across markets. He cited regulatory capital requirements, including those advanced by the Basel Committee on Banking Supervision, that have led to uncertainty in balance sheet lending, as well as construction lending under the High Volatility Commercial Real Estate rules. Similarly, for some life insurance companies, additional federal regulations could be layered on top of the long established state regulations already in effect.

“Changes in global and national trends quite possibly have the greatest impact on the commercial multifamily markets in the United States,” Lopez said. “Although not without unknowns, we are living the economy of the future. The goal then should not be to impose more and more regulation, but instead to strike the right balance that allows us to best serve our customers and grow the global economy.”

With the Trump Administration’s focus on the global economy, MBA will be leading one voice in driving the flow of capital, Lopez said. “We must continue to strengthen all the capital sources and those who link us to our borrowers in the commercial/multifamily real estate marketplace,” he said.

Lopez said technology poses some of the biggest challenges and presents a “new frontier of opportunity” for the business of real estate finance.

“We need to be poised and ready to take the necessary steps in strategic innovation, or transformational technology,” Lopez said. “Like it or not, we live in a time when people expect information instantly, whether we are talking about outreach to customers and partners, business intelligence solutions for commercial lenders or attracting new employees.”

By embracing new technologies, Lopez said, commercial real estate finance has an opportunity for tremendous growth. “New technologies will help us not only attract and communicate with more customers, but also new generations of employees,” he said. “Today, one in four workers in the United States are millennials. Adopting relevant technology to engage this rapidly growing segment of our population will improve customer service and our business operations and help us recruit and retain good and creative employees.”

“We, as an industry, must embrace innovation,” Lopez added. “It is liberating and exciting to think with a mindset of what could be, rather than one based on what has been. “Technology is the transformational engine that will drive this change.”

The third opportunity, Lopez said, is diversity and inclusion, saying not only does it strengthen our industry, but also our workforce.

“The face of America is evolving,” Lopez said, noting that he himself is an immigrant from Colombia. “Over the next decade, there will be 16 million new households in the United States. Today’s minorities will become the majority. The millennial generation proportionally has the largest share of immigrants. It is essential that we view these demographic changes as positive opportunities for our businesses and our society.”

To benefit from this evolution and take advantage of these opportunities, Lopez said the industry must be inclusive in every aspect of its businesses. “We need to move beyond standard business practices and intentionally develop diversity management strategies with dedicated recruiting, mentoring and leadership programs,” he said. “Building a culture of inclusion and diversity in our companies brings more strategic vision to our business plans.”

A diverse and inclusive workforce, Lopez noted, allows for better decision making, providing leadership with alternative perspectives. “Cultural diversity leads to broader ideas and greater success,” he said. “Diversity is not only good for racial and ethnic minorities, but all employees derive benefits from being part of a diverse and inclusive workforce. And a good, strong workforce is better positioned to serve our rapidly changing and diverse market.

These three goals–regulatory balance; technology; and diversity and inclusion–represent MBA’s vision, Lopez said. “This our blueprint for the future. And it will require each of us in this room, collectively as one voice, to benefit from the opportunities available to us,” he said. “MBA is one voice; our strength is unity. United, we form a powerful force that ensures a safe and sustainable real estate finance system. As an MBA member you have the most influential voice for real estate finance. That is because MBA represents the entire industry.”