EQUITY INVESTORS CHASE DEALS ($3 million minimum)

 More preferred and JV equity capital is sitting on the sidelines waiting to be deployed than ever before.  There is a major push toward newer asset classes such as build-for-rent, SFRs and ghost kitchens. Equity will also slowly trickle back into hotel and retail transactions as those sectors start to improve. Investors will seek 20%+ IRRs and 1.8x to 2x equity multiples for ground-up deals. They will target 17%+ IRRs and 1.6x equity multiples for value-add transactions, which could be hard to find in today’s market. JV equity pieces are becoming a bit more difficult because of current pricing, so expect more action in the preferred equity space. Count on a lot more private equity shops and hedge funds to get more involved to diversify their holdings, in addition to foreign capital, debt funds and family offices. Each equity partners focuses on different asset types some focuses on core, core-plus, value-add, opportunistic and development deals with an eye on office, housing, industrial/logistics and retail. While other equity providers  prefer Class C to B- properties in secondary and tertiary markets with a focus on affordable and workforce housing. The companies are also willing to provide preferred equity to fund COVID reserve escrows that are currently being required by most permanent lenders and value-add and/or rehab transactions could also be in the cards. There will be demand for new development and acquisition deals this year. Look for equity capital targeting ground-up transactions as they offer the best return on costs in today’s market. Value-add deals could be tougher as investors are cautious with underwriting growing rents and as competition increases for the few deals in the market. Keep an eye out for a ton of capital seeking SFRs and build-for-rent transactions. Many institutional groups are getting into this space and buying entire communities to rent them back. Also, expect a lot more investors chasing industrial and multifamily deals in the coming months. Office and retail will continue to struggle in certain markets, but high-quality product will see available dollars. Hotels will see pent-up demand and certain markets such as Miami, which has experienced an improvement in occupancies, will see more available capital than areas that have not fully opened back up. Many secondary and tertiary markets are becoming more attractive, and more institutional investors will diversify their exposure to these areas. Investors will seek deals in non-CBD markets because of population increases. Look for a pickup in Boise, Idaho, Reno, Nev., Bozeman, Mont., Savannah, Ga., Tucson, Ariz., Tacoma and Spokane, Wash. Major growth markets such as Phoenix, Denver, Austin, Nashville, Tenn., and the Carolinas will also see plenty of JV and preferred equity deals. Investors are looking for partners who are competent in a specific market or asset class, but really any exposure to industrial has investors salivating over the opportunities. Anticipate equity providers wanting partners with local experience and financial guarantees. Investors target partners with ample net worth and liquidity to handle any issues that arise.

Table of Contents
    Add a header to begin generating the table of contents