Our executive management team attended the 2024 MBA CREF in San Diego this week to meet with capital sources and get updates on what investors want to do in 2024, here are some high-level notes from our meetings:
1. CMBS: Spreads are in from 2023 but indexes are up. Volatility surrounding the Fed decision on rates could widen spreads but some MBS tranches are oversubscribed – so the market sentiment is that yields are close to peak. Bond investors want to lock in higher fixed rates before they drop. 5 and 10 yr money is available on all asset types including office.
2. Bridge Debt: Most lenders are sizing to 70% LTC for better deals with high single digit coupons plus points.
3. Construction: Pretty thin market for construction from banks but private money is geared up and ready to lend, especially on residential asset types. It’s difficult to find hospitality dollars but they are out there. Lower leverage and higher rates across the board.
4. Land: Very challenging environment for land financing. Horizonal development financing is available for SFR lots, BTR, townhomes, and condos – where the exit strategy is to sell to a builder. The most active markets are concentrated in the SW and SE US.
5. Pref/Mezz: Private money is lining up to put out pref and mezz on undercapitalized assets hitting loan maturity. A battle is brewing between borrowers extending with their current lenders vs. taking new financing now in order to avoid value deterioration with mid-to-high teen target returns associated with pref/mezz. It will be interesting to see how much capitulation occurs here in the coming months. Not every lender will extend in perpetuity.
6. Institutional JV Equity: There are nine words that summarize where equity wants to be, “value add multifamily or small to medium bay industrial.” Of course, the equity will look at nearly anything but it needs to be compelling to invest outside the “box.”
About Schelin Uldricks & Co.
Schelin Uldricks & Co. is a firm offering investment banking services with a focus on providing capital solutions to real estate companies and other mid-sized businesses.
Headquartered in Huntington Beach, CA, Schelin Uldricks & Co. embodies a progressive entrepreneurial culture focused on integrity, transparency, execution, and ingenuity. The founding partners bring over 35 years of collective capital markets experience in investment banking, private equity, and real estate finance. The company offers a broad array of services, including debt and equity placement, M&A, GP advisory, divestitures, and financial restructuring.