On October 26, 2022, Dechert partners Laura Swihart and Stewart McQueen attended the CREFC Capital Markets Conference in New York City. Stewart gave opening remarks and Laura moderated a panel on the current housing market and its intersection with multi-family, single-family and build-to-rent properties. Laura and Stewart sat down with Law Clerks Jared Goldstein and Sarahan Moser to recap the conference.

Q: Good Morning Laura and Stewart, thanks for joining us today. To get things started – based on the current economy, what was the consensus amongst everyone at the conference?

A: (Laura) This was the first conference where everyone finally admitted there has been a downturn in the industry and it may last for a bit. Obviously, if you’re in the business you don’t want to admit that it’s not great right now. And so, it takes a while for people to face it, but that is the first step to a recovery.

Q: What was your impression of the general mood?

A: (Stewart) The mood was a little bit more positive than I expected. However, we do not see an upward trend anytime soon. There will be deals, but I don’t think we’re going to be saying, “Okay, we’re back to business on January 1st.” Most of the people I talked to said the volatility is probably going to bleed into next year.

A: (Laura) I agree. We’ll be fine and we always have been. And we’ve been through this rodeo before. So, it’s not doom and gloom. It’s just that we were on an uptick for 12 years. That’s unheard of. So, there’s a reset going on. And it’s due. It’s going to last a few months, and we’ll figure it out again.

Q: What do you think is contributing to the downturn?

A: (Stewart) What’s driving this is where spreads are moving and the volatility it’s creating. Once we know where the new normal is, then people can figure out how to buy and sell at the right prices and decide what to do.

Q: So, are we in familiar territory?

A: (Laura) I mean I don’t know if you disagree Stewart, but I’ve seen it. I’ve lived through this several times now, and people need space. You know, that’s the beauty of real estate, it doesn’t go away.

A: (Stewart) I agree. This is my second cycle reset in my career. As Laura said, we knew this was going to happen. And even back in 2016, we kept asking, “What inning are we in?” Now the game’s not over, but we’re going back to inning one. I’m not worried about it. I came out of the conference feeling a lot better.

A: (Laura) Yeah, I did too, because people faced that we’re in a downcycle right now, but it’s not horrible. It’s not unfixable. We’re going to figure it out. There will be a few slow months. Then we’re all going to roll up our sleeves and move on.

Q: How has Dechert approached this recent downcycle?

A: (Stewart) This is a great time for attorneys, especially young attorneys, to improve and learn. We always come out stronger on the back end—better products, better engineering, better everything. I’m very optimistic.

A: (Laura) It’s a great time to learn. I’ve learned the most in the downturns in my career. It’s scary. I have always said that when it’s slow, we [at Dechert] are nimble. We don’t do the cookie cutter stuff. We produce new products with our clients, and it’s so interesting. If you’re forced into being nimbler, you’ll come up with interesting ways of financing things. You’re keeping your clients going, and it’s like your brain peaks. We are not the firm that only does public securitizations like a machine. We do the weird side stuff. So, we get to be partners with our clients during this time and try to come up with the new normal. And I find it to be fun.

A: (Stewart) We have to be nimble and creative. I couldn’t walk five feet without bumping into someone who wanted my thoughts on possible alternative structures and solutions. I’m sure, Laura, you had the same experience. It was constant. I must have talked to three hundred different people.

A: (Laura) I was getting bombarded.

Q: How are companies staying competitive?

A: (Stewart) This industry evolves, we always evolve. We’re always looking for the next solution.

A: (Laura) In the last downturn, people’s houses were foreclosed on and so there were all these empty houses all over the country. In response, companies decided to buy, fix, and rent them to people. They were buying already-existing abandoned houses and fixing them up so people could live in them. That’s what an SFR is, a single-family rental. And it made neighborhoods better; it made cities better. A lot of people start out in multi-family rentals, in apartments. Then they start a family, and they understandably want a backyard and a place for their kids to ride bikes and play outside. If they can’t afford to buy a home yet, single-family rentals give them the opportunity.

A: (Stewart) Single family rentals produced positive economic growth in neighborhoods too, first with retail—the shops that opened, the jobs that were created. There was a benefit to it. But there’s still not enough.

Q: What about “Build-To-Rent” properties? How do they fit into the equation?

A: (Laura) Now companies are connecting with contractors and buying, for example, a field in Ohio, and then they are building homes there. It can be all ranges, too. Some of them are smaller houses, others are five-bedroom houses with swimming pools. The companies build these properties and then tenants can rent them. The company takes care of everything—they mow the lawn, fix the dishwasher, all the things that a property owner would do—but the properties are homes, not condominiums. It’s nice because if a tenant has a large family with children, they can live in a home, and then if they run into financial troubles, it’s just a rental, so they’re only on the hook for one year.

Q: Interesting. Any final thoughts or impressions you’d like to share?

A: (Laura) Housing has always been interesting to me. It was a great conference, and it was great to reflect on how Dechert is leading the initiative with real estate capital markets.

A: (Stewart) I agree, and I thought Laura’s panel was great.

Q: Thank you for your time, Laura and Stewart.