At Rochford Capital, we specialise in managing the complex financial risks unique to the real estate sector. With extensive experience working alongside developers, operators, and investors, we understand the challenges this industry faces and deliver tailored solutions to ensure financial stability, optimise returns, and manage risk effectively.
Real Estate
Key Challenges
The infrastructure sector is defined by long project horizons, where planning, construction, and operations span decades, exposing projects to significant economic and financial uncertainties. Substantial capital investments are required upfront, often well before revenue generation, creating heightened sensitivity to market volatility and funding gaps.
Interest Rate Volatility
Real estate projects are heavily reliant on debt financing, making them highly susceptible to interest rate fluctuations. Rising rates can increase financing costs, reduce valuations, and compress returns.
FX Exposure
Many real estate transactions involve international investments or cross-border supply chains, exposing projects to currency risks that can erode profitability and affect asset valuations.
Perpetual Real Assets
The indefinite nature of the exposure through multiple economic cycles requires a dynamic hedging solution that aligns with long-term commitments while maintaining flexibility to adapt to evolving conditions.
Development Financing
Interest costs are commonly capitalised to debt through the construction period which compounds the projects sensitivity to interest rate risk in later periods and risks IRR outcomes if not managed efficiently from inception.
Project Lifecycle
Funding structures change over time through project lifecycles complicating hedge structuring which must always match the underlying exposure to ensure an effective solution.
Narrow Margins
Real estate projects typically return modest margins resulting in an outsized sensitivity to margin compression through increased interest costs vs other sectors.
Liquidity Management
Managing cash flows is critical in real estate, particularly for projects with long lead times, irregular revenue streams, or significant upfront costs.
Covenant Risks
High levels of leverage and volatile market conditions, including interest rate movements or changing cap rates, can strain financial covenants (ICR, DSCR), threatening access to financing and investor confidence.
Default Risk
Tenant defaults or delays in project completion can disrupt cash flows, heightening the challenge of balancing robust hedging with cost efficiency.
Financing Packages
Non-bank lenders often participate in the financing and so it is critical at the planning stage to construct financing and security packages to allow non-lenders to provide hedging and access transaction security.
By addressing these challenges with tailored, holistic strategies, we help real estate clients ensure the viability of projects, mitigate risks, protect returns, and achieve their financial goals.