Unless there is an important reason for real estate owners to refinance in that given moment of volatility...
This shrinks the volume of private debt markets dramatically, something we are about to see in the coming months for the space we focus on.
It's hard to say. I don't like using a crystal ball.
However, it is quite apparent to us that, for the most part, real estate leverage has been a lot lower...
Furthermore, there has been a whole lot less speculation in this area, because hot money chasing hot trends has really focused on other sectors more popular today.
During my 2019 travels through the continent — visiting London, Manchester, Frankfurt, Munich, Vienna, Prague, Zagreb, Athens, Cyprus, etc — cranes were everywhere.
It is said that stock markets tend to overshoot, both on the upside & downside.
We aren't sure just yet whether the current crash, similar to 1929 & 1987, is just...
And therefore, it is hard to predict how private debt markets in the real estate sector (a place where we are always active) will be affected in the coming months.
We tend to like opportunities that are inefficient & illiquid but are quality deals in top tier real estate locations & structured in a way that gives us a meaningful margin of safety.
Most of the junior debt has us at very high returns, but also with meaningful downside protection (a buffer of 20 to 25% break-even).
In other words, when you dig into the structures, there is at least 20% points of equity, which can absorb losses, before our principal is affected.
Give it a watch.
Both of these developments are examples of what we could call investing in great deals. Luck also helps!
As I have always mentioned on my feed, our focus remains on picking the right developer to co-invest alongside.
They also tend to pick the right location for RE developments & make sure the "comps" makes sense so that we giving value to buyers.
Examples of this include a cheaper overall price...
Finally, we also make sure we only work with developers that have...
Finally & most importantly, lower than average LTV leverage has been important during the last two years...
It just didn't make any sense, since we were operating from a defensive, higher margin of safety, standpoint.