From the Desk of Professor Eyzenberg
The second quarter ended with some guarded optimism for the future. As states began to reopen, we held our breath and watched the economy slowly inch forward.
The real estate market was certainly not immune to the impact of COVID-19, but the worst seemed to have disproportionately impacted the retail and hospitality sector. The ever-present drumbeat of distressed debt did not materialize in any significant manner to satisfy the large pools of capital that were waiting.
The good news was that the CRE debt and equity capital markets did not undergo the same seizure as they experienced in 2008, and money (measurably) flowed into the space. Multifamily propped up by the agencies and HUD fared well, especially in the low interest rate environment. As the market collectively decided that the world will not turn into a scene from The Walking Dead, hope for a brighter future spurred select lenders to fund development loans (albeit with recourse from banks and higher pricing from the debt funds).
Alternative capital structures took center stage with retroactively-funded C-PACE loans providing rescue capital and Ground Leases helping to recapitalize over-levered properties.
We at Eyzenberg & Company continue to work tirelessly to support our clients during this volatile time.
– David Eyzenberg (Adjunct Professor at NYU Schack & UM Herbert Business School)
Select completed transactions
PROPRIETARY CAPITAL SPOTLIGHT
Joint Senior-Construction and C-PACE Loan Program
Ground Lease structures continue to provide an alternative source of cheap capital to the private real estate markets.
Though far from mature, the industry has begun to segment into the fixed-income (held-to-maturity) vs. the private equity (exit) model. While the fixed-income model features lower cost (3-4% going-in cap rates), it is not able to effectively provide certain features such as buy back options to leasehold tenants. Though the PE model does provide more flexibility around future reconsolidation, its higher price tag (4.85%-6.5% going-in cap rates) make it less attractive for existing cash flowing properties.
Eyzenberg Ground Lease Capital has the unique ability to fund ground lease transactions across the entire spectrum, ranging from development deals to core multi-tenant assets with or without buybacks.