April 11, 2023

The news recently has been full of stories about banks in turmoil. Silicon Valley Bank (SVB) went bust, First Republic has been pushed to the edge, and the Swiss government brokered a firesale of Credit Suisse to prevent further trouble.

We’re closely monitoring developments in the banking sector, but I’m not overly concerned. The biggest banks and the overall sector are still strong, and Alliance is built to thrive in uncertain conditions like these.

The Fed has been raising interest rates and will need to continue doing so until inflation has been tamed.

Failure to prepare for higher interest rates are what sank SVB. Many other banks are exposed in similar ways, if to a lesser degree. They made long-term loans at very low interest rates and are now forced to pay higher rates to acquire or keep deposits. For banks, this is very painful.

We’re seeing two major effects In the real estate industry. Interest rates on loans are higher, so capital is more expensive. But perhaps even more importantly, banks are looking to shore up their wobbly balance sheets with much tighter lending. For many investors it is now much harder to obtain debt financing.

Fortunately, Alliance is very well positioned to continue finding, financing, and closing great deals.

Our long track record, excellent credit rating, and strong banking relationships enable us to continue accessing debt finance. The value of our relationships has never been clearer.

Furthermore, our long experience and sophistication in our niche means that we are able to structure deals in a variety of ways to help keep our banking partners happy and maximize our added value.

Our flexibility on loan terms helps us continue to get favorable deals from banks, including very reasonable covenants. Meanwhile, competitors in the space may be struggling to access capital, keeping them out of the market.

To top it off, Alliance’s deep investor network also helps us by providing great access to equity capital. Our adaptability when it comes to capital structure is another huge asset.

Few other investors in our space can match Alliance’s sophistication in these times of tighter credit. Some banks may be in turmoil, but we’re continuing to find great deals and deliver for our investors.

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