Ackman-Ziff Market Update

What a start to the year! Between a new administration, rate volatility, tariff news (and the resulting shock to the securitization market), and Rory completing the Grand Slam, it's been an eventful few months. Through it all, strong liquidity in the credit markets continues to make us optimistic for the year ahead.

Here are a few things we’re excited about right now:

We’re seeing quotes very close to cash-neutral on a $220M+ office refinance. The property was acquired in 2019 at 90% occupancy but has since dropped to 55%. There’s a story, of course: our lender is being paid off at a $60M discount, and the sponsor has two signed leases that will bring occupancy back up to 85% by the end of 2026. For the right basis, the right asset, and the right sponsor, we are seeing capital coming back to the office sector.

Cautious Re-entry by Lenders:

• Traditional banks remain conservative on office assets, especially Class B/C and properties in non-core markets.

• Life insurance companies and debt funds are selectively returning, favoring well-located Class A or repositioned assets with strong tenancy.

We recently marketed a multifamily deal for common equity and ended up with a highly competitive process for preferred equity (classic story of the last 3 years). One group stood out by offering a hybrid pref/common structure with compelling economics:

• Up to 90% LTC (but no funding for cost overruns)

• 100% of distributions to the pref partner to an 8% initial return

• Then, 1.0x to the sponsor

• Then, 70/30 (pref/sponsor) split to a 12% XIRR

• Then, 60/40 split to an 18% XIRR

• Then, 50/50 split thereafter

We think preferred equity into development is becoming commoditized and by year end structures like this will become more commonplace.

• Construction Costs: Despite concerns around tariffs, inflation, and supply chain disruptions, hard construction costs (labor and materials) have generally stabilized compared to the volatility of 2021–2023. Pricing for steel, concrete, and lumber has plateaued, though some regional variations exist.

• Opportunity Zones: Institutional fundraising is expected to pick up this summer with potential positive changes to the OZ law. A key update could allow all forms of capital, not just capital gains, to roll into OZ funds. If that happens, the current retail investor slowdown might become a non-issue.

  Despite headwinds, good deals still get done. Projects with strong fundamentals (location, sponsorship, clear exits) in OZs are still raising equity — especially in multifamily, industrial, and mixed-use. Some family offices and mission-driven investors are doubling down.

• Industrial Portfolio in the Carolinas: A major recap is underway for a shallow-bay industrial portfolio with an institutional sponsor. The life insurance LP's equity position is being recapitalized. We’re hearing cap rates in the high 5% going-in, stabilizing to mid-to-high 6% with exit caps around 6.00%-6.25%. That puts project-level levered IRRs in the low teens — a relatively tight spread given today’s private credit returns.

  Shallow-bay industrial is becoming a niche favorite for income-focused and value-add investors. The appeal lies in the sticky tenancy (local/regional businesses, light manufacturing, service providers), low new supply, and ability to acquire at steep discounts to replacement cost. Institutional investors are willing to take common equity risk for the relatively thin returns on paper given the tailwinds that could result in huge upside.

Let’s connect if you want to talk through what we're seeing out there — or if you just want to trade PGA Championship predictions.

Jordan Brustein; Andrew Rudy

E: [email protected]; [email protected]

M: (JB) 516-996-7722; (AR) 858-947-8738