U.S. Capital Markets Glide Path to Clearer Skies

Slide Number 11
Questions Today2
C&W’s Baseline Glide Path3
Glide Path to Clearer Skies:Key Takeaways4
Market positives to keep in mind5
Slide Number 66
Slide Number 77
Inflation must cool to allow the Fed to pause & pivot8
Key measures of inflation are still running too hot9
Wage growth must cool to bring inflation down10
We probably need a recession to cool wage growth11
Odds are high a recession is imminent12
And this is what it will look like13
This is when it will be over14
In case you didn’t get the memo…15
Glide path to inflation approaching Fed target16
Allowing the Fed to pivot in Q1 202417
Historically, buy property when Fed starts cutting18
Slide Number 1919
Banks are an important lender for CRE20
SVB wasn’t the only bank with explosive deposit growth21
Many banks loaded up on treasuries and MBS22
All banks are on a mission to shore up their balance sheets23
Taking a step back….24
Slide Number 2525
CRE exposure is manageable for most banks26
Small & community banks have more exposure27
Lenders were more disciplined this go around28
And better supply fundamentals29
Slide Number 3030
Debt markets down but still functioning31
CMBS issuance volume also constrained32
Conduit spreads still very volatile and elevated33
It’s time for debt, distressed & opportunistic capital to step In34
Slide Number 3535
Even if you can get a loan, terms are increasingly onerous36
Key lending thresholds pressured amid rising rates37
Smaller deals more likely to make it to finish line38
Higher end office product will still attract debt39
Slide Number 4040
Triggers to stress & distress = confluence of factors41
Cross-sector loan maturities vary by magnitude42
Loan maturities a particular challenge for office43
Quantifying one layer of distress: increasing obsolescence44
Stress & DistressKey Points45
Slide Number 4646
Must pass other macroeconomic milestones first47
Impact of tighter lending standards on CRE investment48
Slide Number 4949
A lot more than this…50
REITs signaling a 20-50% price correction still on the horizon for private CRE market51
It’s all about the 10-Year (Treasury)52
If 10-Year goes to 3.5%, Baa goes to 5.0%53
Which means cap rates go to 6.0% - 7.5%54
Anything not trophy faces even greater pressure55
Anything not trophy faces even greater pressure56
Slide Number 5757
Slide Number 5858
Sell-side: crystallizing strong returns & the go/no-go decision59
CRE stacks up well against other assets60
Buy-side: strong vintage years follow periods of dislocation61
Buy-side: income resilience remains key to next chapter62
Buy-side: an income-focused era is upon us….63
Strategic Recommendations64
Slide Number 6565
Slide Number 6666

Made with FlippingBook Learn more on our blog