Construction lender here. In talking with Brokers, it seems like LP equity partnerships are becoming increasingly hard to originate. This works in my favor to some extent as the top part of my capital is in the LP/Pref territory (stretch-senior), but if I want to do a deal at lower leverage and they need to bring in new LP equity, the deal becomes that much harder to capitalize. Seems like developers who have programmatic relationships with LP equity providers are fine, but developers who need to bring in a fresh LP equity partner are SOL. Curious to hear what others are experiencing out there. Seems like a good time to set up an LP equity platform...
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What’s the saying “shit slides downhill” or something like that.
There’s a reason why people aren’t stroking LP checks. We don’t know exactly how restrictive Powell will be long term. Why write checks with deals incorporating inflated land costs/hard costs today?
That’s the dilemma everyone is in. The folks who took down land preemptively without securing the rest of the capital stack are sweating. Also firms with uncalled capital and or ramped up hiring with the expectations of AUM will cut staff eventually. Just like developers/sponsors that grew too quickly.
Yeah its brutal out there fam. We can't do a JV but were happy to give you some face ripping pref!
Best case is this sentiment begins to change sometime this summer imo. Fortunately, we don't need to capitalize any deals until the end of this year but yeah, shits rough.
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