Earlier this month, Hines secured $182 million to refinanceIntersect, a four-building office campus in Orange County. The dealoffers some insight into how the debt markets are working. Lifecompanies and the agencies have been the most active in providingdebt during the pandemic, and this deal was no different. Hines,along with its joint-venture partner, placed the three-year,interest-only financing with MetLife Investment Management.JLL secured the funding on behalf of theborrower.

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"Capital availability does not seem to be an issue, butvaluation, underwriting, pricing discovery, and human capacityconstraints have all been headwinds to lending the past severalmonths," Kevin MacKenzie, executive managingdirector at JLL Capital Markets, tells GlobeSt.com. "On the debtside, life companies and agencies have been the most activethroughout this time, and the appetite has continued to strengthenin recent weeks. Bank and debt fund activity has been moreselective but for the right opportunity there is interest, and wealso see that increasing."

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Asset value is also playing a role in asset pricing. In somecases, pricing has declined during the pandemic. "On assets with acore profile the cost of fixed-rate debt is close to where it waspre-COVID, and, in some cases, lower—such as apartments—through theagencies. On more transitional asset profiles, spreads haveincreased but over a much lower LIBOR index, so typically floorshave been instituted," says MacKenzie. "This has generally placedall in borrowing rates into similar ranges they were approximatelyone year ago, which still should be an attractive cost of capitalfor many situations."

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Despite the market dislocation and stall in the debt markets,real estate has continued to be a favored asset class. In fact, thepandemic may prove to fuel more hard asset investment, akin toincreased real estate allocations after the 2008 financial crisis."Regardless of fluctuations in sentiment and transactions activity,the overall trend among institutional investors has been for higherallocations to real estate," Lauro Ferroni, seniordirector of research at JLL, tells GlobeSt.com. "With negativeinterest rates in many regions of the world, there a focus on cashflowing assets. We see no reason for this trend to reverse over themedium to long term given the ability for yield and multitude ofadvantages of real estate investments."

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The pandemic will drive strategic changes, particularly for someasset classes, like office. "Site selection and occupancystrategies post-pandemic will be driven principally by strategicobjectives, such as productivity, innovation, collaboration,workforce recruitment/retention, wellness and access to capital andcustomers," predicts Ferroni.

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Ultimately, MacKenzie estimates that owners and investors willlean on existing relationships more to drive and closetransactions. "It is important to remember that having the rightrelationships is paramount to getting proper interest and surety ofexecution in the current market we are navigating," he says.

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.