Charlie Rose
Managing Director and Portfolio Manager at Invesco
Where in the capital stack are you most comfortable playing today, and where are you finding the best lending opportunities?
Originating senior loans is highly attractive in today’s environment. We can originate a whole loan in the 7 percent-plus coupon range (S+300s) at a 60 percent LTV using today’s “V” and, after leverage, aiming to achieve a double-digit return with deep equity subordination. Floating-rate loans can offer both return upside in a rising rate environment and downside protection in the event of any value declines.
What’s your best piece of advice for borrowers seeking financing during turbulent times?
As a relationship lender, we will really lean in for our best relationships in turbulent times. I would advise borrowers to really focus on their most trusted relationship lenders. Rather than focusing on the last few basis points of pricing, borrowers should prioritize working with lenders who can offer certainty of execution.
Would you rather finance a well-established sponsor on a Class B office renovation in New York City, or the first-time developer of a multifamily project in the Sun Belt today? Discuss.
We are focused on best-of-class institutional sponsors and the most liquid real estate asset classes. As such, we’re generally lending to our relationship institutional borrowers on industrial and multifamily acquisitions. Now is not the time for us to take on excess borrower, property type or business plan execution risk — as we can generally trade down on risk in this environment while still achieving our target returns.
What’s your take on an impending recession? How bad might it get, and what are the silver linings (if any)?
I think it’s important to break out how a recession may manifest. To start with, we are not currently in a recession: nominal GDP growth remains robust, employment is very strong, and consumer spending has remained resilient. If we do enter into a macroeconomic recession, given the strength of both the consumer and the corporate sectors’ balance sheets, it is more likely than not that it would be a shallow and short event. From a real estate perspective, we will likely see an initial period of bid-ask spread in which forced sellers may have to take fairly significant haircuts, but once liquidity returns to the system we think real estate will continue to benefit from the same secular demand and supply trends that we have been convicted on for some time now.
When will we reach the bottom of the market, and when will we see a thawing in the debt markets?
The capital markets in general hate uncertainty, and the real estate debt market is no different. Until we have certainty on the ultimate terminal rate and the knock-on effects of this historic rate cycle, we will see lenders remain very deliberate. This could last well into next year.
What would you do differently during the next pandemic?
I had an opportunity early on in the pandemic to decamp in Hawaii, but it just felt too logistically challenging at the time. So, in the next pandemic, I would take my entire family to Hawaii and rent a house within walking distance of the beach. If there is no reason to be near schools and work, it sure would be a great opportunity to do something entirely different for a period of time!
What keeps you up at night, and what helps you sleep?
I don’t have much trouble sleeping, and, when I do, I turn on Headspace meditation and usually zonk right out. That said, while the capital markets are certainly adverse, I generally sleep well at night knowing that I have an amazing team and our portfolio is highly defensive in nature. If anything keeps me up, it’s likely worrying about my two daughters, who mean everything to me.
Lighting Round: Would you rather…
Lend in New York or take a job as a septic tank repairman?
There is no city like New York. Young people, dreamers and strivers will always want to be in New York. I’ll take lending in New York all day long.
Run a marathon or swim in the Gowanus Canal?
As an Angeleno, I’ll have to say I’d choose a swim in the Pacific Ocean!
Work remote 100 percent of the time or work in an office 100 percent of the time?
I first started going back into the office in August of 2020 and I am a big believer in the value of working in a space that is dedicated to work, alongside your colleagues. I am in five days a week because I believe in collaboration; training and efficiency just aren’t the same when you’re not in the office with your team.
Sit in L.A. traffic for two hours or sit in a stalled NYC subway car for 30 minutes?
If you live in L.A., you learn all the shortcuts (“take Fountain”) so I could probably cut that two hours in half!
Work in a Michelin-starred kitchen or work in a McDonald’s?
In our business, we want to be the best in the industry, so I suppose that’s the equivalent to a Michelin-starred kitchen, but we also want to grow with our relationship borrowers and lend at scale, so I think we’re trying to be more like a Shake Shack.
