Creating Value & Mitigating Risk in an Age of Rising Interest Rates

By James Hochman, Chief Financial Officer, and James Holleman, Vice President of Capital Formation

Federal Reserve Chairman Jerome Powell recently signaled the central bank was likely to raise interest rates by a half-percentage point at its upcoming FMOC meeting May 3-4. This closely follows a 25-basis-point hike in March 2022, and the Fed is signaling that more increases and tighter monetary policies are on the way. With higher policy rates, spread product —borrowing rates that are set off the policy benchmark — have risen even further. For real estate investors, this interest rate risk is complicating an already complex market.

At Grubb Properties, our experienced in-house Finance Team has a roster of professionals that focus on the evolving interest rate environment to ensure our loan portfolio is risk managed. Our team deeply considers the debt requirements of a particular project as well as the entire loan portfolio. For both our flagship Fund VII and the Link Apartments Opportunity Zone REIT, the result is a portfolio that protects our assets for the long term and applies the best financing structure to each project. This adds value in all interest rate environments but is particularly impactful in one where the risk-free rate is rising.

In a series of videos and a recent paper, “The Future of Multifamily Development – Creating Value and Mitigating Risk in the New Age of Rising Interest Rates,” James Hochman, Chief Financial Officer, and James Holleman, Vice President of Capital Formation, go into further detail as to how Grubb is navigating the current rising interest rate environment.

Creating and sustaining value in a rising interest rate environment is challenging for any real estate investor.

James Holleman discusses Grubb’s emphasis on long-term, fixed-rate debt to manage a rising rate environment:

Download the full paper to learn more about Grubb Properties’ approach to a rising rate environment.