Finance’s Tweener Phase
Investment funds are just realizing they’ve got to go to secondary markets to get returns, Atalanta Advisors' Annu Chopra tells us, but there’s a time gap between that revelation and closing deals. Now that investors are taking those meetings, deals will start finalizing in secondary markets in Q2. She equates this part of the cycle to Q3 ’11, when investors started paying attention to development opps; deals, though, didn’t close until Q2 and Q3 2012.
Annu and Rachel Gilbert Solomon (above) say funds also want to write bigger checks than last year. Not only are they racing to spend before this heady market cycle ends, discretionary investors also want to deploy their existing capital so they can take advantage of the positive fundraising climate. Those that were investing in $10M chunks want $15M or $20M deals (at typical LTVs, that’s a $70M deal), and $15M investors want $30M opportunities. That means it’s harder to find a private equity partner for smaller deals, but for those willing to buy in on the low side, there’s less competition.