Market Outlook: Investment Opportunities Across the Capital Stack

Today’s capital markets environment has made it difficult for real estate investors and developers to source capital to refinance upcoming debt maturities and finance acquisitions and developments. Rising inflation and continual increases to the base rate, effective federal funds rate (EFFR), combined with geopolitical and economic uncertainties, mean that once-plentiful available cheap capital is now expensive and constrained.

While the capital markets have limited liquidity, deals are still getting done. However, pushing these deals across the finish line now requires more effort and creative solutions than we have seen since the global financial crisis (GFC).

These fundamentals are changing the face of the capital stack, the financial vehicle used to finance real estate investments, and the underlying operations at the asset level. Sponsors are turning to other financing sources, outside of typical bank/insurance company loans, to support financing requirements.

This creates significant opportunity for sophisticated alternative lenders to diversify portfolios by filling the gaps up and down the capital stack. We anticipate these changes and opportunities will influence how capital is invested in real estate throughout the coming year.