The cost of capital is climbing – and dealflow is feeling the strain

The real estate investment management market is coming to terms with its latest hurdle this week. The cost of debt has been on the rise for some time, as select managers have told affiliated PERE titles. And in today’s market, the cost of doing business may now be outweighing borrowers’ ability to keep pace and hold their investment strategies steady heading into this market cycle. Though the impact to date has been moderate, as highlighted earlier this week in analysis shared by PERE, central banks are moving toward more defensive positions. The possibility of rate cuts has diminished as a result, as noted in a March episode of The PERE Podcast. All this sets the table for how borrowers will need to reshape their own tack to keep lines open with debt capital markets while they have liquidity to keep capital moving. In this episode, PGIM’s head of real estate credit strategies Bryan McDonnell provides his perspective on the situation at hand. Be it at the Newark-based manager or beyond, real estate fund managers and investors are having to recalculate their basis and re-order how they navigate the next wave of acquisitions, holds and exits arriving in their pipelines.