Notable Trends in the Infrastructure Space
In this Ullico Q&A, Jeff Murphy, managing director and portfolio manager of the Ullico Infrastructure Fund, speaks about trends affecting institutional investors in the infrastructure space.
“Property Developers POV” highlights the perspectives of established real estate developers.
Michael W. Reschke founded The Prime Group, Inc. in 1982 and since inception, has directed and managed the development and acquisition of over $12 billion of institutional-quality real estate projects across the United States. As Chairman and CEO, Mr. Reschke continues to manage and direct the private real estate development and investment activities of Prime.
Banks are wary about lending. “Banks are getting nervous about the future of different sectors in the real estate industry. Everybody’s nervous about financing new construction today, especially office buildings. As a result, there’s been a pullback in competitive construction lenders in the capital markets.”
What’s happening as banks pull back. “There have been alternative lenders, a lot of start-up lenders, private credit and debt funds, because the spreads and returns are so attractive right now. For example, a company will be created where someone contributes $1 billion of equity to a new debt fund and gets a warehouse line of credit from banks for $3 billion. Now they have $4 billion and they’re doing multiple $150 million construction loans. They’re start-up operations. They hire experienced teams to be the construction lender. But obviously they don’t have the same history as a bank or lender that’s been doing this for 50 years or longer.”
Choose partners with experience. “It’s always good to work with lenders who have gone through a few real estate cycles. If there’s a problem or a glitch on the job for some reason, reasonable people can work it out with no problem. If there’s a change in market conditions — look at COVID, the world shut down — how do you deal with things like that? You need experienced lenders.”
On working with Ullico. “We’ve done business with Ullico for over 20 years. They’re as good or better than the construction lending arms of major banks. In terms of comparing their administration of the loan and how they handle draws and monthly paperwork and reviews of draw package … they handle it as well or better than any construction lender. They’re a very sophisticated real estate lender, especially on the construction side.”
The views and opinions expressed by the subjects do not necessarily reflect the views or positions of Ullico.
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