How long has it been since your last deal?
I thought 2025 would see a pickup, but still not seeing it. Sellers seem to be coming down on price, but not by much yet. We're at 14 months of no deals being done.
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I don't know how people are getting deals done
Two years ago this week with no end in sight. Given this, firm I currently work for is downsizing and half the acquisitions team is being let go. I've been looking for my next opportunity. Fun times.
Coming up on 3 years. Self-employed and current portfolio pays living expenses, but sure do question if I'm just wasting time spinning my wheels looking at deals that have no chance of penciling...
Why specifically are your deals not pencilling?
I look at ground up and value add, primarily industrial. Ground up - lease rates can't justify construction costs, even if I got the land free. Working a few deals where TIF might make them feasible. Value add - very little product available on or off market and my competition is paying what it might be worth stabilized for an empty building that needs capex, leasing, holding costs, etc.
This quarter. Value add retail where we tied up a vacant building and were able to find a tenant prior to DD expiration. We had a very good idea of who would want to lease it before our DD even started.
How big was the deal? We are looking at value add retail but can't get the returns on grocery-anchored of any meaningful size given interest.
~$10mm ish before accounting for the cost of repositioning the asset. We had some advantages working in our favor. 1) A broker who was completely incompetent at marketing the property and 2) we’ve developed and retrofitted multiple buildings for this tenant in the past, so we had a pretty good inside edge on knowing exactly what they’re looking for and they are comfortable with us being their LL.
5 years…
5 years? that's got to be painful. 2021 and 2022 seemed like a decent time to take advantage, was your shop super conservative with what deals you were going after?
We do complex developments. So they only come around so often. And we don’t sell (or at least try not too). Also the business I work for isn’t based on deal volume - we are completely vertically integrated so the other areas of our business (leasing, PM, CM, Development when we are building, and other companies) float the business when we have no new deals. We don’t charge acquisition fees. Very low volume. The last 5 years it was less that the market had a few good years and more that we had a few huge developments ongoing so weren’t really in the market for new deals.
From a mortgage banker’s perspective, did 4 deals for $100M last year and am at 3 for $60M YTD. 21-22 was between 8-12 deals per year for $200M - $300M. Still a good living at 100-200 bps in gross fees, but the drop off hurts.
Thanks for insight. Was last year $500K-$1M in net fees? ($100M x 100-200bps x 50% to the house)...doesn't seem bad obviously dropped off from the peak. Seems like a great living.
Correct - net overall % is a little lower than 50% due to a tiered house split. I also work with a senior partner, so I'm ~ 30% - 40% to his 60% - 70%. Still a good living as an associate, and the ceiling is uncapped...
wow this seems great, do you just work at a bank giving out commercial real estate loans?
Agency shop - one of the top 3 from a production standpoint.
2 years with nothing really in the pipeline. We also sold off a good portion of our portfolio during 2021 and 2022, so we are generating less management fees than normal which hurts as well.
are you hearing any rumblings about new strategies to generate fees or is management just kicking themselves at this point?
We've been active the entire stretch, with our most recent closing a month ago but as most of you know we do weird complex stuff that only pencils because of tons of incentives and super distressed buyers. So I expect we are an anomaly. I haven't heard anyone doing anything really, for a while when I speak to buddies.
Are you willing to share your strategy? Love learning new avenues to take in this business.
We buy distressed historic office for conversion
embarrassed to say. slowest market in recent history.... my addiction to fragrance collecting saved my mental health
(In at least multifamily) If you were active in 2021 and 2022 but not active in 2025, your shop needs to re-evaluate their approach. Not saying 2025 is a great time to be investing but it’s certainly better than 2021/2022.
110% agree
Seeing lots of volume from sunbelt markets
Or alternatively their shop has so many problems they can’t do deals, no money / no equity left.
I can tell you in the institutional multifamily equity space (NMHC top 50 or so), deals are and have been happening, but below the historical normal volume. 2023 was the slowest time period
Fair point, many can’t do deals right now because of their portfolio.
“Your shop needs to evaluate its approach”
🥸 “Or alternatively theyve already spent all their money on bad deals!”
I feel like early 2021 was completely different compared to end of 2021 for multifamily investing. Early 2021 was still pretty good, but values were completely different by the end of the year.
When I’ve looked back at deals I bought, I generally think of anything that closed during or before May 2021 as something that will be okay (by okay I mean approximate returns at the pref plus or minus), then everything after that is a dog.
I had an easier time finding positive leverage deals in 2021 than 2025. We bought some deals in 2021 and locked in very favorable long-term financing that should do ok long-term. These were deals with term and credit. If you paid top dollar for a development site in 2021, things aren’t looking too good right now.
But what is lthe comparative going-in CoC?
Is 50 bps positive leverage on a going-in 3.50-4.00 better than 50 bps neg leverage on a going-in 5.25-5.50?
Depends on what you do. If you are a developer, 2021/2022 were points in time where you could look at a pro forma and it would make some sense. Now, all of your inputs turned out to be wrong (debt, expenses, concessions, etc.), but they penciled. Now a lot of development types make zero sense, so people aren't developing nearly as much. If you are in life sciences, demand went from all time highs in 21 and 22 to nearly zero today. More broadly, and especially in acquisitions, I agree with you. We bought nothing in 2021 and one small deal in 2022....but have done quite a bit the last 24 months. Much better market today than three years ago.
Did one deal second half of last year. Looking for more but its tough
About a year since I've sold one. Maybe two since a groundbreaking.
Should be breaking ground on a garden development this summer. Land was purchased in 2021.
Went to under contract on an infill site earlier this year and have another podium site that should be uc by the end of the summer.
2 fucking years. And everyone else I see doing deals is just overpaying massively. I don't see how this is sustainable.
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