GlobeSt. selected Greg Friedman as a 2025 Rainmakers in CRE Debt, Equity & Finance
Congratulations to Peachtree Group's Managing Principal & CEO, Greg Friedman, for being selected as a 2025 Rainmaker in CRED Debt, Equity, & Finance by GlobeSt.
"Extend and Pretend"—Just as Hamlet famously questioned, "To be or not to be," we are also on the brink of a crucial revelation. Are we facing a seismic shift with sustained higher interest rates, a largely overlooked issue? How will this shift affect commercial real estate and other asset classes in both the short and long term? Are the public and private sectors ready for what appears to be the inevitable? Today, we face more questions than answers, and indecision is no longer viable in a higher interest rate environment.
Unlike in the past few downturns, such as COVID, the Global Financial Crisis and the dotcom bust, the Fed significantly reduced interest rates, enabling owners of commercial real estate and lenders to easily engage in "Extend and Pretend," even when cash flows were negative or razor-thin, thanks to the exceptionally low interest costs.
Today, we are in a commercial real estate recession showing no signs of abating. The economy boasts considerable strength, driven by a strong job market, and record liquidity is on the sidelines. I do not see the necessary catalysts to revert interest rates to levels seen in previous cycles. Therefore, I don't see “Extend and Pretend” to be an effective strategy and would prepare for more bankruptcies, foreclosures and forced sales as reality sets in that we are in a new rate paradigm or maybe just a return to normalcy that, unfortunately, will be destructive to values, especially to the lower cap rate assets. Ultimately, amidst any market disruption, there will be pivotal opportunities for those with the decisiveness and the liquidity to seize them at the right moment.
This commentary originally appeared on Greg Friedman's LinkedIn page on May 1, 2024, in response to a Wall Street Journal article titled: Even If the Fed Cuts, the Days of ultralow Rates are Over.
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GlobeSt - In a challenging era for CRE finance, these men, women, teams and companies have demonstrated exceptional prowess in navigating choppy waters. They managed to steer through a period of elevated interest rates and successfully grappled with falling property valuations, a trend that has made refinancing particularly tricky for many in the sector. Moreover, they have shown an uncanny knack for operating within capital markets that have become increasingly stringent. Their innovative solutions and steadfast leadership have paved the way for new opportunities in what has been an unpredictable market.
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Schwab Network: Real Estate Value "Mismatch," Better Buying on Horizon
Greg Friedman offers a wide perspective on the real estate market. He uses the 10-year treasury yield as a market indicator but notes inconsistencies in the latest trends compared to real estate.
Greg Friedman offers a wide perspective on the real estate market. He uses the 10-year treasury yield as a market indicator but notes inconsistencies in the latest trends compared to real estate. Greg believes there will be better buying opportunities on the horizon once real estate finds a bottom to build a new foundation. Listen to the full broadcast on Schwab Network.
Dislocated Markets Amidst Trump 2.0 Economic Risks
In a timely and insightful conversation on the Peachtree Point of View podcast, host Greg Friedman sits down with Mark Zandi, Chief Economist at Moody's, to discuss the current economic landscape and what investors should be watching.
In a timely and insightful conversation on the Peachtree Point of View podcast, host Greg Friedman sits down with Mark Zandi, Chief Economist at Moody's, to discuss the current economic landscape and what investors should be watching.
Recession Risks on the Rise
Zandi doesn't mince words about the current economic situation. He notes that the probability of recession has jumped from 15% to 35% in recent months, primarily due to policy decisions – especially the escalating global trade war. While he believes the economy remains"fundamentally sound," Zandi warns that continued policy uncertainty could tip the scales toward recession within weeks.
"If he continues down this path for another couple, three, four weeks, recession will be more likely than not," Zandi cautions about the administration's trade policies.
Interest Rates and Commercial Real Estate
For commercial real estate investors, Zandi offers a sobering perspective on interest rates. Despite the administration's desire for lower rates, he believes the 10-year Treasury yield (around 4.1%) is appropriately priced for a well-functioning economy. Unless we enter a recession, Zandi doesn't foresee significant rate decreases in the near term.
Commercial real estate, which Zandi acknowledges has"been in a recession the last three years," faces continued challenges. While he believes much of the valuation adjustment is complete, a broader economic recession would mean "another leg down in valuations and pricing."
Key Indicators to Watch
For investors trying to gauge recession risks, Zandi offers practical metrics to monitor:
- Weekly initial unemployment claims: Safe at 225,000, concerning above 250,000, and recessionary at 300,000
- Consumer spending patterns, which have "flatlined" since November
- Housing market metrics, particularly new construction activity
Private Credit Markets
On private credit markets, Zandi noted that private credit has played a critical role in recent years, stepping in to provide capital when banks pulled back, which he believes helped the U.S. avoid a recession. The market has grown rapidly, now estimated at $1.7 trillion and surpassing the high-yield bond market and rivaling the size of the leveraged loan market.
The Bottom Line
Zandi's parting advice? "Buckle up." With policy uncertainty, trade tensions, and shifting consumer sentiment, the economic road ahead promises to be bumpy.
To hear the full conversation and gain deeper insights on navigating these challenging markets, listen to the complete episode of Peachtree Point of View with Mark Zandi on your favorite podcast platform.
