Ackman-Ziff Market Update

We’re continuing to monitor a complex and rapidly shifting landscape across the real estate capital markets. May brought more turbulence, particularly on the equity side, as investors remain cautious and unsure about current risk-adjusted return profiles.

Here are a few key themes we’re thinking about (in no particular order):

The broader economic picture remains stubbornly uncertain with trade policy shifts, elevated interest rates, and tighter immigration rules giving way for what feels like the highest levels of investor caution in this cycle.  Headlines around tariffs and budget deficits are contributing to volatility in the bond market, and investors are waiting for long-term rates to stabilize for not only pricing clarity but also a pulse on the health of country’s debt load. However, this pause also reflects a disciplined approach: many groups are focused on protecting basis, building in wider risk-adjusted margins, and staying patient in an environment where pricing discovery is still underway.

At the same time, we’re encouraged by the resilience in credit markets, the depth of capital still on the sidelines, and the fact that high-quality real estate in strong markets continues to attract interest. While underwriting is more conservative, we’re seeing well-capitalized groups prepare to move decisively when the right opportunities emerge.

Despite the broader uncertainty, credit markets remain highly liquid, with spreads fully normalized since Liberation Day across most asset classes. That’s created divergence in underwriting assumptions between equity sources. Public REITs, non-traded REITs, and discretionary funds are actively deploying capital, locking in tight spreads to refinance or acquire assets at pricing well below replacement cost.

Firms like AvalonBay, EQR, and Carmel are purchasing well-located multifamily properties at sub-5% cap rates, underwriting to stabilized low-5’s yields. This is notable considering the spread to the risk-free rate. Their thesis is straightforward: secure strong basis today, hedge interest rate volatility with low spreads, and assume values will recover if base rates normalize. If rates stay high, returns may be modest—but if they decline, these assets could outperform. Under that logic, existing asset buys may compete with or exceed ground-up development returns, especially in today’s constrained rent growth environment.

OZ capital formation is gaining momentum again. Roughly half of all institutional OZ funds are preparing for a new fundraising push in anticipation of a 2026 legislative refresh. While the proposed updates to the OZ legislation have both pros and cons, we recommend reading this thoughtful post by Jay Parsons [link] for insights into where the policy may fall short.

One concern we share: the emphasis on rural markets may not attract substantial capital, even with tax incentives. Urban and growth-oriented markets continue to be the more logical targets for many investors. That said, OZ 2.0 will likely spark renewed interest and equity inflows into OZ strategies—something we’re tracking closely.

While still a favorite of institutional LPs, the shallow-bay industrial sector is experiencing greater scrutiny. Tariffs could disproportionately impact local businesses—like HVAC contractors, building component suppliers, and small distributors—that drive demand in this space. After a wave of capital inflows in 2024, many investors are now pausing to assess how small business tenants will respond.

That said, shallow-bay industrial still holds relative appeal. It continues to attract interest, especially given the dry powder earmarked for this sector at the start of the year. We anticipate continued activity, though underwriting is growing more conservative.

Despite the noise, we’re actively engaged in opportunities across the firm that give us reason for optimism:

• Bridge-to-perm multifamily and Build-to-Rent (BTR) financing remains highly competitive, with strong lender interest.

• Land development deals backed by forward takeouts from national homebuilders are drawing fresh equity and debt commitments. Some SFR REITs are even forming direct partnerships with local builders for at-C-of-O acquisitions, possibly in anticipation of future MLS acquisition restrictions.

• Opportunity Zone developments with 6% return-on-costs are attracting structured preferred equity that remains accretive—even under conservative downside scenarios.

• Data center-adjacent deals continue to receive disproportionate attention and capital allocation.

• Condo construction debt remains a favorite among debt funds, offering strong risk-adjusted returns and consistent liquidity.

• Grocery-anchored retail remains in strong favor among both lenders and equity investors. With stable cash flows, defensive tenancy, and attractive yield profiles, these assets are seeing steady demand—even in a more selective capital environment.

We appreciate the continued partnership and look forward to staying in touch as the second half of the year unfolds. Please don’t hesitate to reach out if you’d like to discuss any of these themes in more detail—or share what you’re seeing in the market.

Jordan Brustein; Andrew Rudy

E: [email protected]; [email protected]

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