“If something cannot go on forever, it will stop.” – Herbert Stein’s Law
Confession time (besides not being an economist), I will be turning 48 this month and will mark my 30th year in the professional work force. I have been around the block a couple times and have been through my share of credit cycles. However, I am hard pressed to remember one that is playing out exactly as this one is doing. Real rates (rates adjusted for inflation) are negative which historically has been bullish for risk assets. Yet risk premiums continue to blow out with “risk-on” the mantra of the day. This is a new one for me and for everyone my age or younger (important perspective on decision makers.)
For the sake of brevity lets ignore why it’s happening and instead focus on what actions we may want to consider taking (regarding CRE financing strategy.) Last newsletter I discussed borrowing fixed rate if you are predicting stagflation (or for stabilized legacy assets where you never want to play the interest rate or cash out refi game.) However, if you believe that we will instead head into recession than floating may be the better option in several scenarios.
Historically, when an inversion preceded a recession (not always) there was an average 1.6-year gap in between. This means the upward pressure on rents in certain asset classes (think multifamily) will continue at least for a bit longer. If you are acquiring (at market adjusted cap rates) value add deals or developing you are better of going floating due to a lack of amortization, flexibility of exit strategy, and lower current pricing. If you really want to hedge outrages rates you can buy a cap far out of the money to avoid a dooms day scenario. Further, if you believe the real yield curve is inverted (I don’t) then you can bank on getting lower rates 3 years out (average recession lasts 1.5 year.) Final food for thought. CMBS and CLO lenders are struggling today as bond buyers find it easy to do nothing or need to be seduced with yield. Banks and some private lenders with A-note or warehouse leverage are still providing very attractively priced financing options (especially for multifamily or BTR development). Leverage is a bit lower but at least the liquidity is still there in the mezzanine loan and preferred equity market to make up the gap.
– David Eyzenberg (Adjunct Professor at NYU Schack Institute of Real Estate & University of Miami Herbert Business School)
Select completed transactions
$19MM Multifamily | Acquisition | Memphis, TN
Structured and arranged bridge financing to acquire a 402-unit apartment complex in Memphis, TN.
ReedsBay Investment Group and Eyzenberg GreenCap (an Eyzenberg & Company affiliate) have rolled out the industry’s first joint senior-construction and C-PACE loan program. Combined, the two firms will offer a true one-stop-shop for developers and owners seeking the most efficient capital stack structure in the market place.
Blended at 6.5%+
New development, acquisition with a heavy renovation component or recapitalization in tandem with a redevelopment of the property
Multifamily or Multifamily-majority Mixed Use
Combined Funding Size
Up to 90% LTC
Term & Amortization
Senior: 6 months – 3 years (with options for extension)
C-PACE: Self-amortizing up to 30 years
No lockout but subject to pre-negotiated fees
Currently active in 24 states and the District of Columbia – CA, CO, CT, DE, FL, IL, KY, MA, MD, MI, MN, MO, NE, NV, NY, OH, OK, OR, PA, RI, TX, UT, VA, and WI
No repayment guarantee
$100MM | BTR | Development | Panama City Beach, FL
$6MM | Multifamily | Acquisition | Sioux Falls, Sd
$16MM | Multifamily | Development | Miami, FL
$40MM | BTR Short Term Stay | Development | Houston, TX
$8MM | Retail | Acquisition | Clermont, FL
AVAILABLE JOINT VENTURE EQUITY
There is great demand from domestic and foreign equity investors for multifamily, build to rent, industrial, office and self-storage assets, with hospitality and retail having niche appeal as well.
The typical raise will target 20-100M check size for core plus, value-add and opportunistic strategies in 24/18 hour cities.
Though many past assignments involved one-of transactions, there is strong interest in programmatic joint ventures with operators focused on sector-specific, geographically clustered strategies.
– Henry Chakardjian & Kenneth Lorman (Eyzenberg Equity Desk Leads)
Eyzenberg & Company is actively seeking to add team members to join our growing firm. In this video, our President gives the intro.
Real Estate Capital Alliance (RECA) Q1 2022 Production Statistics
Eyzenberg & Company is a proud member of the Real Estate Capital Alliance (reca.us). RECA members arranged over $3.9 billion in capital in 2021. Below are the complete RECA production statistics for Q1 2022.
Aruyel Nurbekova joined Eyzenberg & Company in 2022 as Junior Analyst. She assists with underwriting, analysis, and financing memoranda preparation for commercial real estate debt and equity capitalization assignments.
Prior to joining the firm, Ms. Nurbekova worked as a Business Valuation Analyst at Ernst & Young company, one of the Big Four accounting firms.
Ms. Nurbekova completed her Bachelor of Science degree in Corporate Finance and Investment Management at KIMEP University in Almaty, Kazakhstan.
D: (305) 995-0777
Mr. Muniak joined Eyzenberg & Company in 2022 to focus on debt and equity originations in his newly adopted home of South Florida.
Mr. Muniak is Co-Founder and Managing Partner at Makal Equities, a real estate investment firm specializing in multifamily, industrial and retail property in Southern California and New York. He invested, sourced, and underwrote all commercial development and investment opportunities during this time. Furthermore, Mr. Muniak’s previous position as Managing Director at a Family Office in New York allowed him to develop his skills as he increasingly became involved in all aspects of fundraising and deploying the fund’s investment mandate. In his career to date he has invested, sourced, and underwrote commercial development and investment contracts, exceeding 100 million dollars.
Furthermore, Mr. Muniak is a Board Member and shareholder of the Mangia Hospitality Group in New York, where he oversees all aspects of fundraising, including the Group’s investment mandates. As a strategic dealmaker, Mr. Muniak is responsible for retail acquisitions & new developments and acts as a liaison with City and State Government bureaus. Due to his established reputation as a key player in the real estate and hospitality industry, Mr. Muniak has managed to build a wide portfolio of bicoastal projects and has worked closely with top developers, entrepreneurs, and restaurateurs nationwide.
Originally from New York City, Mr. Muniak graduated from Johnson & Wales University in Rhode Island, and completed his graduate Business certificate in Sydney, Australia. He is a long-time martial artist and a philanthropist.