Higher interest rates, lower appraised values, banks unwilling to rollover loans, a lack of replacement financing, and pressure on rents can be expected to reduce the dollars available for distribution in recent vintage development joint ventures when and if the capital event takes place. The potential outcome may be capital calls and equity multiples below 1.0x.
Plan sponsors investing alongside developers or in operating companies in late cycle development projects may be at risk of finding their interests unaligned with those of their development partners. Staff hired by these entities to interact with plan sponsors could become expensive overhead. If developers and operating companies reduce staff when profits on development deals become losses, it could put staffing pressure on those plan sponsors who skipped the traditional advisor path to joint venture investments.
L&B has been in the real estate investment management business since its inception in 1965. Representing clients as a fiduciary is our only business. We provide investment management services for multifamily, industrial, office, retail, cold storage, life science, student housing, and build-to-rent housing. We have put our varied investment approaches to work at the proper times ranging from investing in core to value-add properties to direct development without development partners. In 2011, our vision expanded to include a Build-to-Core (BTC) with development partners.
