Trends Watch: Distressed Real Estate

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.  

This week, Elana talks with Christopher Johnson, Partner, Tailor Ridge Capital Management.

What is your outlook for investing in distressed real estate?

The lack of supply due to moratoriums has been both a curse and a blessing in our space because it has shrunk supply but boosted exit prices. We anticipate the market will soften next year as inevitable foreclosures do eventually materialize, which will take pressure off both first-time home buyers and distressed investors. How bad it gets will depend much on government timing. 

Where do you see the greatest opportunities and why?

Anywhere that is currently impenetrable by a fintech approach. Challenging construction/rehab projects, small projects, states where foreclosure auctions are held in person and at the asset opposed to online. It's definitely a time for quality over quantity, as valuations everywhere are on the high side and many buyers are stretching more than they should.

What are the greatest challenges you face and why?

We're a growing financial business so the biggest challenge is always to match capital inflows with loan demand both in terms of volume and timing.

What keeps you up at night?

The fact that we're at the tail-end of a 40-year falling rate cycle and it's hard to see how overall interest rates can go much lower. We probably need to be more scared of deflation than inflation in the longer  run, but managing a rising rate environment will certainly be challenging and most people who remember a rising rate environment are retired or close to retirement.

The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper.