Wells Fargo Urges REITs to Examine LIBOR Contract Language
04/05/2019 | by Nareit Staff

Readie Callahan, head of communications strategy at Wells Fargo’s LIBOR Transition Office, participated in a video interview at Nareit’s REITwise: 2019 Law, Accounting & Finance Conference in San Antonio.

Callahan said that the transition from LIBOR (London Interbank Offered Rate) to SOFR (Secured Overnight Financing Rate) is critical because LIBOR is so widely used.

“[It’s in] any variable rate borrowing that we do, whether it’s adjustable rate mortgages, securitizations, floating rate notes, or derivatives,” she said, adding that the industry is massive with about $350 trillion in LIBORs used globally.

“It’s really important to focus on how LIBOR impacts each client, what their LIBOR contracts consist of, and how they use LIBOR,” Callahan said.

Within the REIT industry, Callahan said the biggest impact from the transition will be on contracts post-2021, the year LIBOR is expected to end, although no specific cessation date has been set by regulators.

“It’s important for the REIT industry to really evaluate those contracts maturing post-2021,” Callahan said. She noted that proactively moving away from LIBOR may be the best way to ease the transition.

“The industry values…are focused on recommending and endorsing language that market participants can use,” she said. “It’s incumbent upon individuals to read that language, evaluate it, and consider incorporating it.”