Capital Markets Update November 2, 2020

As we enter the last quarter of the year, we are starting to see more movement in the market.  There are some distressed transactions starting to take place and in the preferred asset classes we are starting to see more efficient capital enter the market.

Over this past real estate cycle most of the residential real estate markets have focused on multifamily and condominium’s, with a real emphasis on urban infill locations.  We have started to see over the past couple of quarters the focus turn to single family housing, both for sale and for rent properties.

We at BayBridge Real Estate Capital are currently bringing unique capital solutions to clients that are developing single family lots, for rent communities and for sale communities.  As institutional capital is warming up to this asset class, we are working with our clients to tailor unique financing structures and facilities in this space.

For many of our clients we are helping them solve for the lack of mid-priced capital in the market.  Currently there are very low interest rates for some properties that fit into a very narrow box, in many cases if a deal is outside of that box the cost of capital soars to the higher yields quickly.  We are helping these clients to secure more moderately priced capital or helping them create structures that are still accretive to their equity.

In the distressed market the bid ask is still wide, that being said we are starting to see some distressed assets trade.  The most notable trade is the Coloney Capital Hotel portfolio which was sold for just over the cost of their debt.  This is a meaningful transaction since it is helping to define the value and determine asset values in the hotel space.

A key difference to note in this current Covid-19 economic crises compared to the most recent financial crisis of 2009, is that there is a tremendous amount of capital raised. This capital has for the most part has been sitting on the sidelines waiting for distressed opportunities or for the market to adjust and largely discount asset values. The market has been fairly resilient to date in terms of discounted asset prices. This is forcing the sidelined capital to moderately creep back into the market with more realistic expectations.

As you look towards the end of the year, we welcome the opportunity to help you plan your capital needs.

Find out how our real estate financing experience can benefit you.