Is anyone slowing down heavily in the last month?
Feel like we were busy and it fell off a clip. I am in lending, but not sure how others are doing in acq/dev/lending, etc?
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Also in lending. Fell off a cliff. Closing the last few deals but not much in the pipeline. It makes sense as no deals are really penciling right now and banks are pulling back and not nearly as aggressive.
Same here. I’m in Non-RE asset lending ($5MM+) and new deal flow has completely dried up in the last few months. Deals are still happening in my space, but most are electing to pay with cash rather than finance. Businesses that aren’t flush with cash are postponing purchases.
Same here. At a major bank lender. Deals had signed up and were closing last month, but the past few weeks have been quiet. This week in particular has really just been an off week. There’s literally nothing to do. No deals are moving right now. But would rather this than work on a bunch of deals where sponsors know they won’t move forward. We have originators who send us deals from sponsors that never move forward so it does feel good to not have to deal with that BS right now.
It’s august…bad month to ask if deals have dried up. It’s traditionally slow
Not just August, but August in the post-pandemic era - where people are less afraid of being out of the office
Dev and acq are in same place. Moreso acq due to lack of value creation spreads and financing. Debt markets are a mess and manny acq leaders are on sidelines waiting for clarity from fed / new normal on SOFR / fed funds rates. Inflation continues to drive rents but I think exit caps and no one having confidence in making bets is weighing in, on continued price discovery vs typical auction processes and multiple bidders gunning for the same assets.
High yield debt / mezz / pref and its full steam ahead. Seems like the best place to be rn
The only volume we are seeing is from clients in 1031s or our one closed-end fund. Thankfully, that closed-end fund is our largest source of business.
All-in rates for fixed is hovering around 5% again, and cap rates remain in the high 3s - mid 4s. I hope those of us in the industry stored some acorns from all those discretionary refis, cause those days are far beyond us at this point.
Agency Lending here, we have slowed down. Our volume of prospective deals haven't averaging around 2.5b in active volume. But our hit rate has dropped about 4.5%. We get to the quoted stage and smaller borrowers disengage and larger borrowers/PE groups put us on hold. This is the most I've personally seen of people pulling deals under application as well. It'll take time for the borrowers to digest the higher rates, even brokers aren't understanding the volatility.
Our developments haven't slowed down much. The deals we have pencil out because of low land costs take our new MF projects' costs to about $250k a door, so a 7.5% YoC is now at like a 6.8%-7% YoC which we still have an acceptable spread. The issue, if any, has been lenders willingness to take on new projects so we are reaching out to more local lenders rather than our normal network of big banks.
Damn still getting near a 7% RoC.. what market are you in if don't mind? Southeast?
We’re trying to pencil to a 6.25-6.5 in NE and it’s been very difficult, even if we “make the market” for rents.
FL, NC, SC predominantly now. When you can get land for $6k/door (the cheapest) to $22k/door (most expensive) for 300+ units it's not too hard to make deals pencil out. We have about 5,000 units in our pipeline with land cost in that range, so we don't move forward with any deal under 6.5% YoC. We are forecasting 3% rent growth over 10 years too so it's not like we are trying to force the 15%+ growth that we've seen the last year or 2. We are also starting at rents that are near the middle of the pack compared to our comp set in the areas we are developing.
Where are you finding 7.5% YoC deals right now???
Super busy, affordable housing is fairly counter-cyclical and a lot of people who took out bridge debt last summer in the hopes of taking it out in 2022 got smoked and are now marketing their assets instead of dumping in additional equity
Did they not buy rate caps or swap their debt? Who goes naked on a floater?! (I know people do it just always thought they were nuts).
Not as unusual as you might think. When you've had ten years of barely any movement on interest rates, why would you expect it to change as rapidly as it did March-May 2022? If you're competing to win a deal in a highly competitive bidding process, that few hundred thousand dollars of savings might actually be what puts you over the edge. Maybe you had a firm commitment to refinance that expired. Maybe you thought you'd be taking it out with as of right credits that now don't actually cover the full refi.
You would be surprised. SL Green, RXR, Brookfield....
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RIP to the 10-yr this morning. May as well make this a temporary memorial thread for us fellow debt bros for the time being.
Currently chugging away on a rare opportunity - 5.10% all-in fixed on a 3.90% going-in cap :) :) :)
Agency?
Yes sir.
Seeing light deal flow on the acquisitions side. A lot of end of year launches are approaching bid dates, my team is participating in a handful but I'm worried that they will get competitive simply because there is not a lot on the market.
Looking ahead, I ask brokers what they have in the hopper and it's not looking good. Going to be a very slow end of year. I was hoping there would be a post-Labor Day rush but i think that will have to wait until after the New Year. Guess I'll just plan my winter ski trip and hope i don't get fired.
LOL
Just senior enough that I am not getting my wheels spun to exercise the process and work at kinks as a new employee, just junior enough that I don't really get effected comp wise for deals not happening.
I haven't done shit in a while, I am helping with some meaningful parts of deals that are getting forgotten about but its pretty slow and can be done in a few emails.
I am stepping on the gas. Lenders are getting desperate, I feed off the blood.
Depends on which type of lender. The ones that have already reached their budget or close to it will not be desperate. There aren't also many incentives to be going above and beyond and exceeding the budget, in fact there are mostly negatives as it will impact the budget for next year.
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