Surviving the Credit Crunch

In a volatile capital market that’s more unpredictable than usual, investors and operators are longing for a calm in the capital-market storm. In time, comfort in real estate investing will be restored. This relief may mean decreased values based on higher cap rates as a result of higher capital costs.

There’s no doubt that navigating through the current capital markets is choppy, given that the illiquidity in these markets has caused drastic changes in lending and investing criteria. Portfolio lenders, who have basically sat on the sidelines during the past few years of high leverage and aggressive pricing, are now capitalizing on the opportunity to bid on debt and equity opportunities. Due to current volatility and substantial losses on current portfolios, many lenders have been advised to hold off on quoting deals, except for existing clients or operators with a proven track record.

It’s hard to say just how long the transition will last. During a turbulent market, investors and operators are wise to seek the guidance of an experienced advisor who can help steer toward smoother sailing. Hopefully better weather is just on the horizon. 

Scott Sweeney is vice president and Joseph Maehler is a capital market specialist of Buchanan Storage Capital (BSC), a subsidiary of Buchanan Street Partners, which provides capital, advisory and investment sales services to self-storage owners nationwide. The company offers competitive capital through proprietary products along with structured finance and equity solutions through its advisory services. BSC has provided more than $3 billion of products and services to customers through its offices in Atlanta, Chicago, Los Angeles, Newport Beach, Calif., San Francisco and Washington, D.C. For more information, call 800.675.1902; visit www.buchananstoragecapital.com.