State of Market Discussion

Hi all,

Wanted to see how everyone's pipeline is doing this summer. Would be great if you could share what you're seeing out in the market as well as give your professional background for context. I'll go first.

Debt placement, US nationwide, mostly multi, $40-80M+ average deal size

  • Sales pipeline has slowed way down, deals that were signed up months ago are either being retraded or getting walked away from, very few are closing as-is
  • most deals being closed right now are either rehab/value-add deals or new construction lease-up. Very few core/core-plus deals with older vintages. Lenders aren't believing the rent growth story anymore, the debts just not there
  • Lenders have shifted their acceptable metrics requirements, LTC down 5% for every lender type, going-in & exit DYs up 100 bps, and really it's a matter of sizing to a 1.25x DSCR on a stressed constant (usually 5.75%/30-year), on exit
 

MF and SFHR lender

3-5 deals a week, down a bit

Loan sizes vary, but borrower is mainly bigger PM, REPEs, borrowers, ex. MF1/Rialto, doing about 100-150m a week. We do then go through like 2 weeks slumps with 1-2 deals only then a 3-4 week period of 3-5 deals a week. 

Very inconsistent and volatile. From the brokers out there they still say every deal is being shopped hard but rarely are LifeCo or BNY touching them right now. 

Does seem the bigger borrowers are just adjusting and waiting to see were rates will flush out to as a norm and then regardless will jump back in. 

 
Most Helpful

National Office Investor/Operator - Focused on institutional deal sizes ($150mm+) in major MSAs. My first couple bullets are purely what we're seeing in the office space but candidly, many of the below points are relevant across asset classes. Curious to hear what others are seeing. Things definitely aren't great but we're hanging in there. Ultimately, office operators in the trophy/AAA space will  do just fine as the space has really become a tale of two cities.

  • Capital markets are slowly significantly - with exception of a few special situations, majority of deals being pulled from the market, starting to see deals financed in 2018/2019 in major MSAs where bids are barely above in-place loan balances. Core arena is being hit the hardest with NNN long-term leased assets effectively being hosed in terms of valuation. Investors don't seem to want to catch a falling knife in the core space. For those who read the real estate alert, there's been a few examples of these NNN assets that have been hit hard but more are to come in the next 6-12 months. Brokers seem to be scrambling to figure out pricing as much as buyers are. Case in point would be a broker speaking confidently on price guidance on a Monday, only to backtrack and revise 5-10% lower 2 weeks later. We're seeing this across the board as ballooning interest rates, a shrinking liquidity pool, deteriorating fundamentals, and investor skepticism surrounding the asset class all continue to make deals both extremely hard to pencil at pre-reset levels and hard to sell to IC in the current climate. 
  • Cap rates are expanding significantly - We're starting to get debt quotes with rates starting with a 5 in front for moderate leverage and a 6 for higher leverage debt packages. As expected, cap rates are beginning to adjust substantially although limited comps have actually printed. We're seeing guidance blow out 100-150bps for processes that got underway prior to February. Main and main assets that historically would've traded for a high3s/low 4s cap in-place are being guiding to mid 5s. The idea of a 4 cap urban office building seems all but dead going forward. 
  • Liquidity is starting to dry up - We're hearing more and more lenders completely on the sidelines for office. We're hearing that liquidity is drying up in general but this seems to be more relevant for office assets. Additionally, this seems to not only be a factor of interest rates and debt pricing but an overall lack of clarity/acceptance on what true market clearing valuation is in terms of stabilized office. Lack of liquidity will ultimately be a massive tailwind for national operators/investors with programmatic debt relationships.
 

Helpful. I’d agree w these points. Many debt funds/lenders I’m familiar with are effectively out on office … for foreseeable future… many have been for couple months now. Shits even trashed in securitized mkt (albeit shit across the board rn). Hate the expression but “flight to quality”… the last couples years a few decent sized funds (sure some know a few), pushed into call it secondary office markets / low cost alternative assets vs the trophy buildings (thesis being: “good” basis, folks moving out of gateway cities, LA/SF/NYC are cesspools, can offer 50% discount rents to premium assets and deals can pencil)… thing is no wants or wants to lease these assets. These guys are fucked. Failed thesis across the board/country. I’m in a orig seat at debt fund. Most deals don’t pencils… too tight acquisitions / bid ask not adjusted enough yet, rates ripping, fucking stupid modeling assumptions, etc. Not just speaking to office but most classes. Deals still closing but earlier pipeline deals and selective new ones. Shit coming across rn is very tough. Rarely understand the equity play on most deals. Many bids/TS dying bc PSA are being terminated… they finally see it also.

 

Voluptate voluptatem illum et iste. Recusandae omnis est animi eos pariatur deserunt.

Est harum sint sequi neque nesciunt corrupti consequuntur distinctio. Quod quibusdam velit excepturi quis voluptatem molestiae. Dolores corrupti harum quis quis accusamus. Iste consequatur inventore quas perspiciatis dolorum error.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
kanon's picture
kanon
98.9
6
CompBanker's picture
CompBanker
98.9
7
dosk17's picture
dosk17
98.9
8
DrApeman's picture
DrApeman
98.9
9
GameTheory's picture
GameTheory
98.9
10
bolo up's picture
bolo up
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”