Navigating the CRE Financial Landscape: Debt and Asset Optimization

The 2023 IMN Mid-Market Multifamily Forum in Phoenix, AZ recently brought together industry experts to shed light on the relationship between assets and debt in the current CRE landscape. With a focus on debt specificity, optimization strategies, and the challenging market conditions, the conference provided valuable insights into equity optimization and the future of financing.

Thirty Capital’s Founder and CEO, Rob Finlay, moderated a panel titled New Long Term Debt Financing v. Bridge & Other Shorter-Term Loans & Lines in Today’s Market. Read ahead for key takeaways from the discussion. 


Debt Specificity and Asset Optimization

Tailoring Debt to Assets

One of the key takeaways was the importance of tailoring debt to the specific nature of the asset. The panelists mentioned the significance of analyzing the forward curve and interest rates to determine if the right debt is in place for a given asset. They agreed that you can’t use a one-size-fits-all approach to asset and debt management. Instead, you must match the appropriate debt to where you think the asset is going 


Market Challenges and Constraints

Decreased Deal Volume

The industry is grappling with challenges that impact the feasibility and attractiveness of potential deals. Panelists acknowledged a considerable decrease in deal volume. They attributed this decrease to constraints imposed by loan rates, debt service coverage ratio (DSCR), and yields.


Financing Availability and Difficulties

The industry faces a new challenge where financing is accessible, yet acquiring financing has become difficult. Financing has seen a shift towards short-term bridge lenders and short-term fixed-rate lenders. The panel highlighted considerations around these lenders, exploring their role in an environment where transaction volume is considerably down.


Stressed Property Expenses

Agencies and underwriters were noted to be stressing property expenses, impacting overall proceeds. The panel deduced that there is a need for a holistic approach that considers both asset and financial factors in tandem.


Forecasted Interest Rates and Market Sentiment

Interest Rate Projections

The panel provided insights into forecasted interest rates, revealing that short-term rates are expected to remain stable. However, long-term rates are projected to fluctuate between 4.5% and 6%, signaling potential challenges and opportunities for investors.


Equity-Seeking Opportunities

Amidst the challenges, a prevalent theme was the quest for equity. The majority of conference attendees were actively seeking equity to either finalize existing deals or identify new investment opportunities. The need for financial partners in navigating the complexities of the market was discussed.


As the industry grapples with ongoing challenges and uncertainties, the emphasis on tailored debt, understanding interest rate dynamics, and the pursuit of equity opportunities emerged as key themes during the panel. The discussion was rich with valuable insights and strategies. While the mood may have been solemn, the conference provided a platform for industry players to share their perspectives and strategies around debt and financing.

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