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Spoke with First American Commercial, the team in San Diego is national. They said volume is way down from 12mo ago.
I'm fairly busy and so far content with the direction of my year. Selling some MF, financing a handful of MF deals and leasing a single tenant owner user building with option to purchase. Tenant might close this year on the building. We'll see.
More deals fall out right now than I'm used to though. That's how it was in all of 2008. 50% of your pipe went to shit.
wow that would be crazy if we are back in 2008-land.
feedback we are getting from many clients indicates that the velocity is dropping off quite a bit.
u never know for sure, but seems like rate increases and general market jitters has everyone sitting on their hands.
my my do i see many deals with severe bid / ask spreads in their future.
we are in the business of supply and demand. I see hefty supply of investment opportunities, but little demand at the ask. so this plays out two ways:
im going with the latter
The market is great. Get this negativity out of here.
I'm on the bond banking side (structured finance). Deal flow is great, investors and issuers are worried alike about the constant rate hikes and the volatility thereof, so issuers are pushing deals early in the year while cost of funding is relatively better. Slow last two weeks of Q1, but early march saw an absurd amount of deals (probably weekly highs in volume within the last 6 months).
Fundamentals seem left and right, treasury curve kinda weird, consumer spending is down, stock selloff obviously still a thing, but unemployment still crazy low and investors seem to have plenty of money they want to put to work. I'm not panicking, and neither are any of my senior bankers.
Let me just go ahead and copy everything above and send it off to my issuers for their weekly status updates, thanks
Deal flow has been awesome on our side. Ground up development here. Market has been surprisingly great.
Do you think it's genuinely more investor demand, or has it been funneled from other deal profiles just to get some lift on the returns? For example, first year in my job we looked at maybe 2 ground up JV's as the LP. The last 6-12 we've looked at about 20 and transacted on 2 just because we needed to boost the returns in order to meet criteria hurdles since literally everything other than opportunistic deal profiles have gotten to anemic return pricing.
Transaction volume is decreasing due to several reasons.
1) incremental interest rate hikes, and expectations of future interest rate hikes. Lower LTV/LTC guidelines in potential deals in 2018/19.
2) Everything is overpriced. In most markets, we have exceeded pre-recession peaks in terms of pricing. Cap rate compressions were present in primary markets, and are now being seen in secondary and tertiary markets. This would've been great right after the recession, but we're 10 years out now and pricing has already recovered a couple years ago.
3) Very ambitious capital sources are trying to use alternatives as a main driver for returns, when alternatives are conventionally supposed to provide diversification. Investment thresholds are being renegotiated to higher unlevered/levered IRRs, largely eliminating the deal flow for institutional grade investors.
PM me if you would like more details.
When 5yr money hits 5%+ things will certainly change (it's around 4.5%). You can hide from 10yr debt easily...
Not to hijack, but interested in taking this topic in a similar, but different, direction. For convo's sake, if the market is actually slowing to near-recession levels, what are people seeing from an Acquisitions vs. Asset Management perspective? Is AM becoming more of a focus? Or, are acquisitions still playing a large role, but maybe honing in on the 1-2 extremely safe/smart deals?
I'm sure a lot depends on your investors, dry powder, market you're in, etc. Curious nonetheless.
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