Written by Vicki Mutchler, Vice President of Capital Transactions
A phrase we know well as real estate professionals is, “real estate is a cyclical industry.”
The funny thing is that real estate professionals (most of whom are natural optimists) hope that this phrase isn’t accurate when markets are continuously flourishing, as has been the case over the past decade. Yet here we are again at the start of a potentially significant real estate capital market dislocation, hoping the upward cycle continues.
In uncertain times such as this, we look back and gain comfort that our favorite phrase, “real estate is a cyclical industry,” has always led to brighter days ahead.
Financing new deals in today’s challenging economic environment is no easy task. However, if you and your firm had a strategy to build strong relationships with your capital providers over the past decade’s high growth market, you will be in a better position to weather the storm. Now more than ever the following themes must be front of mind.
Keep Pulse on Capital Providers
Not all deals are for all capital providers. Each group has a different set of goals and return hurdles. It is important to stay on top of deal parameters desired by equity partners and lenders which can change rapidly in uncertain times.
Flight to Quality
Another familiar real estate phrase that rings true in challenging market conditions is, “location, location, location.” During market dislocations, capital partners are focused on fundamentals, including “main and main” locations as well as proven sponsors with exceptional track records and rock-solid partnerships.
Past Actions Benefit the Future
Capital partners naturally want to do business with sponsors that exhibit impeccable ethics. Past actions of you and your firm, including a track record of following through on projects and promises, will encourage capital partners to extend financing even when times are difficult.
Build Meaningful Relationships
In addition to conducting business with dependable companies, real estate professionals also want to do business with people they genuinely like. Therefore, it is imperative to work toward building both professional and personal relationships with capital partners.