Each quarter I see increased late cycle behavior in the real estate world. From vast amounts of SFR home flipping at an institutional level (see Door/Zillow/Redfin) to development sponsors needing to farm out their 10% equity pieces due to insufficient cash at the operations level plus the reemergence of unsecured and interest-only debt at record high leverage points this cycle, irrational exuberance seems to be inundating the space. Multiple sponsors have approached us seeking opco level investment to recapitalize their firm because they have become so overextended chasing promote despite lengthening construction periods, high costs, higher opex, and weaker than expected rents. Much attention is paid to healthier CMBS performance this cycle, but the debt fund and mezzanine space seems to a real issue.
How do you all feel about the current state of the market in the space and MSA you work in?