Hammond Capital

I wanted to share some insights after being ~75 days in to my entrepreneurial journey. 1. People - Most of my network has been extremely encouraging and helpful. Thank you to all who have provided words of encouragement, offered to make connections, and have reached out to learn more about our investment thesis and deployment strategy. It never ceases to amaze me how powerful this platform is, and how helpful and open others have been in sharing data, deal flow, and advice. 2. Deal Flow - There is still a significant bid / ask spread and misalignment of Buyer & Seller expectations. It appears to be narrowing, although many seem to still be in a pattern of “wait and see” mode, hoping for capital markets improvement after we get through a couple more Fed rate cuts and the election come November. There’s more liquidity in the CRE space than there has ever been, & there is still a lot of money on the sidelines. A signficant amount of capital was raised for value-add & opportunistic strategies on the expectation of distress, which as it pertains to the industrial sector specifically (our primary area of focus), I’m not confident we will see it arrive to a material degree as fundamentals generally remain very strong relative to historical standards, even as absorption slows and supply headwinds persist. The key here is relativity, although things have slowed down, they’ve retracted from an abnormal period of growth driven largely (though not solely) from a prolonged ZIRP environment & secular shifts that occured during and emerging from the COVID era, including nearshoring and onshoring, evolving inventory management practices, and a resurgence of domestic manufacturing. Regardless of the above, we continue to focus on unique special situations where we can achieve cash flowing assets with positive in-going leverage and the potential for future upside. We have been able to generate a pipeline of compelling opportunities and fully expect this trend to continue as the capital markets normalize. 3. Debt Capital Markets - In-going industrial yields for sunbelt growth markets have expanded but remain (generally) in the low to high 5% cap range, depending on location, product quality, and importantly, the degree of in-place mark-to-market opportunity. The banks are still largely non-competitive at SOFR + 250-275, the LifeCo appetite remains very strong for functional well located shallow-bay and light industrial product and often prices UST + 180-200. Historically considered a relatively longer duration lender, they’ve filled the void for intermediate debt and are active for 5-7 year debt with structures that allow for a degree of prepayment flexibility. It surprises me how thin bank spreads are relative to where they’re funding spec construction, which is generally SOFR + ~300 at +\- 55% LTC for good sponsors / developers. Look forward to connecting with all of you and finding opportunity to work together. [email protected] Hammond Capital