With consistently high interest rates and a series of financial dominoes that seem set to contribute to a liquidity crisis, the commercial real estate market looks as if it's headed for an inevitable downturn. When you factor in a lending dynamic that creates a 'doom loop' of declining property values and commercial real estate loan defaults, the outlook can look bleak.
While Promanas is hardly the only commercial real estate company with the clarity of insight required to recognize and prepare for this seemingly unavoidable turn of events, we are fortunate enough to be one of the few that is well-equipped to not just weather the storm but enjoy comparative buoyancy in a competitive industry. To quote from another piece published by us recently:
“Leaner times highlight the value of higher-quality assets, and well-capitalized developers and investors can find themselves in an advantageous position relative to the competition. Additionally, and perhaps most importantly, developers and investors who can recognize these economic and industry trend lines—and have the resources and strategic vision to take advantage of emerging opportunities—can capitalize on lucrative opportunities.”
But what distinguishes the well-prepared and well-positioned from other operators? How is Promanas prepared both structurally and strategically for what’s to come?
Portfolios and Problems
At the risk of overextending the nautical metaphor, the reality is that a significant number of commercial real estate developers and investors will be weighed down by the anchor of portfolios that are vulnerable to the pressures of a market downturn. While many will be unavoidably focused on dedicating resources and attention to portfolio triage to address or fix looming problems, Promanas can stay focused on how to fix other people’s problems—and make some money along the way. Positioning yourself to thrive at any point in the development cycle means being equipped to buy at an attractive cap rate and easily pivot to development when the market shifts. Promanas has demonstrated the ability to ride that cyclical wave and has succeeded in both.
Flexibility and Opportunity
Another point in Promanas’ favor is the fact that we are not pigeonholed into buying any one specific asset class. We are deal-driven: we make decisions without the limitations of property type, geography, or project size. Consequently, we have the flexibility to make decisions based on what’s best from an opportunity standpoint, which is essential in a market correction. We also have an extensive history of executing across a wide range of investment types, from ground-up developments to distressed asset acquisition and repositioning. So while some developers may not have the experience to capitalize on certain types of opportunities, Promanas has the varied and proven expertise to support a diverse approach.
Standards and Structure
One of the best qualities for any commercial real estate developer or investor is the willingness—and the ability—to be picky. Even in the best of times, Promanas is extremely conservative in deciding which opportunities to pursue. That selectivity evolves from a luxury to a necessity in more difficult market conditions. Because our criteria for what constitutes a good deal is so narrow, and our standards are so high, we have a level of skeptical scrutiny and well-capitalized flexibility built into our operational architecture. We know how to say “no,” because we can and do say it weekly. Finally, because we are not a discretionary fund, we are not constrained by mandates or artificial time horizons. We raise money deal by deal (and we don’t start that process until we have a promising deal already in place), so there is no financial pressure limiting our ability to maximize profitability.
The reality is that no one is immune to the unforeseen and the unforeseeable. Dramatic market shifts due to black swan events like pandemics, global conflicts, and sudden economic shocks are always possible and should never be fully discounted. But Promanas has 30 years of experience to lean on in understanding how and why the market moves and how best to position our assets and investors to take advantage. Experience. Structure. Selectivity. Flexibility. These are pillars that ensure Promanas will not be swayed by the emotions of different market cycles, and will instead remain focused, consistent, and opportunistic: positioned to capitalize in the coming slowdown.