2022 Year in Review: Andrew Kleinberg, Axiom Capital Corp.

What person, project, transaction or market trend had the greatest impact on your industry this year? Simple answer is rising interest rates and the speed in which it has happened. Over the last 20 plus years interest rates have generally gone only one way and that has been down. This drastic increase in rates, and the speed in which it has occurred, effect the acquisition market as well as the refinance market. This has led to the slowing of sale transactions as cap rates take time to adjust to the speed of rising interest rates. It also effects the voluntary refinance market as borrowers are not inclined to refinance in this market unless loans are maturing. These two issues of course have caused a slow down in the lending environment.

What emerging trends will drive investment and development in 2023? The rise in rates (and the slowing of the economy) will make it difficult for some properties to refinance out of their current loan amount. This will cause a gap between the amount lenders are willing to lend on a property and the outstanding loan amount. This gap will require additional equity insertion to pay down loans as they mature. 

Some borrowers will have the equity to do so but others will not. Those who do not will need additional equity to save the property from foreclosure and losing all equity. The opportunity will be for those who have cash available to provide the needed equity gap between the current loan and the new loan and negotiate strong returns for their investors.