Real estate sponsors who have been around for any length of time will have experienced the ebbs and flows of the market. Those with less experience may have only done deals during the “good” years—for example, between 2012 and 2019 when the real estate market experienced tremendous growth year after year. How they will navigate a true economic downturn remains to be seen.
Meanwhile, sponsors who have a decade or more of experience will have had to navigate downturns. They may have been forced to refinance, sell or rethink their business plan altogether. Looking at how these deals have performed, i.e. how a sponsor managed through adversity, is insightful for those looking to mitigate risk moving forward.