Regulation Nightmare

Like many of you, perhaps, the term “regulation” has traditionally made my eyes roll into the back of my head. While the political and illogical nature of regulation remains a turn-off, no longer is it advisable to turn attention the other way. With increased regulation for the real estate finance industry being developed over the past several years, the day of reckoning has arrived. As one might expect, our lawmakers have left us with a “camel by committee”. HVCRE, Reg AB, FRTB….all seem to be creating more questions than answers, even for those financial institutions that are responsible for enacting them. For instance, with HVCRE, should a developer really be required to have all committed capital AND internally generated capital remain in the project for the life of the project? As with many of the newly created contractual provisions, the pendulum has swung too far in favor of the governmental agencies, leaving behind a web of confusion for lenders and developers alike. Like it or not, agree with it or not, sponsors need to understand the implications, as it will impact investment decisions moving forward.

Dave Kidder

President and Managing Director