In this paper, we explore how prevailing conditions—including reduced commercial property values, higher interest rates, demand for liquidity and lack of housing supply—are opening a variety of opportunities to generate attractive risk-adjusted returns.
- With the notable exception of residential real estate, which has continued to show resilience, property values have fallen significantly across certain asset classes. At current levels and amid lingering uncertainty, we see opportunities for investors who can provide capital solutions and other strategic financing to private real estate companies looking to right-size their capital structures and execute more efficiently on their pipelines.
- Higher interest rates and economic uncertainty have chilled transaction activity and reduced liquidity, creating potentially attractive opportunities for secondary investors who can supply liquidity for RE fund general partners (GPs) and limited partners (LPs).
- As many operators face a looming debt-maturity wall, and skittish banks continue to limit their RE exposure, we believe experienced opportunistic and “special situations” investors may be able to generate attractive returns by providing liquidity to capital-starved borrowers or restructuring loans on specific commercial properties.
- Supply of residential properties trails current demand in many markets, while demographic trends suggest increasing growth in household formations. As interest rates have risen and many banks remain retrenched, we believe private transitional lenders have the potential to generate attractive returns by financing the refurbishment of older housing stock and construction of new dwellings in key markets.
