Barry Saywitz, President of the Saywitz Company and host of OC Talk Radio’s “Let’s Talk Real Estate,” sits down with Stephen Stein, Co-founder and President of Tauro Capital Advisors. Both professionals discuss the current capital markets environment in connection to commercial real estate, as well as forecasting what will occur in the first quarter of 2023. Stephen argues that although there is a rise in interest rates, Tauro as an intermediary has remained unaffected as clients have an essential need to refinance given loans that are coming due. Developers still need access to capital and as a result, Tauro’s pipeline has stayed consistent. The underwriting climate has adapted to higher interest rates, and there is now an emphasis on a principal’s experience and net worth. This includes heavy scrutinizing of the sponsor’s property and income.
Stephen speculates that there are a multitude of factors to consider as the capital markets enter the first quarter of 2023. First, capital providers will take a step back as allocations from pension funds and insurance companies will drop, forcing money to become tighter. This will shine a spotlight on bridge lenders who do not have the same type of regulators overseeing the lending process. Second, buyers’ expectations must be managed, causing transactions to become slower. Particularly, 1031 exchanges will become slower as the seller may not be realistic with wanting to sell at yesterday’s number to a borrower working off of tomorrow’s number. Finally, general transactions may take longer due to underwriting with lenders asking a lot more questions as part of a thorough due diligence.