As President Donald Trump continued to reveal changes to his tariff policies, the stock market tumbled Thursday, giving back more than half of the gains from Wednesday’s historic rally.
The head-spinning trade policy shifts have roiled markets and brought on a deep sense of uncertainty. In the middle of Times Square, a group of real estate finance executives were attempting to keep their cool and separate the signal from the noise.
Among tariff concerns is a 25% fee on aluminum and steel.
“We’re not taking a pause. We just believe in linear pacing,” Julia Butler, a managing director for real estate at private equity giant KKR and the CEO of KKR Real Estate Select Trust, said at Bisnow’s Lending and Investment Conference.
“We’re never going to get it perfect, but discipline is not getting scared in uncertain moments, but not getting overly exuberant either. You just have to keep going.”
In the early morning before the event, Goldman Sachs Managing Director Nitin Jagga held a meeting with his staff, highlighting trade routes that may be impacted by tariffs, he told the audience at the Marriott Marquis. But the possible outcomes of the new policies are still difficult to predict.
“Even if you start isolating, where are the tariff impacts on commercial real estate? Where is the recession impact on commercial real estate? Where is the interest rate impact in all of this? And I think that’s impacting everything,” Jagga said. “There is still uncertainty out there on how to position yourself if rates rise. What margin of error do I have?”
Alvarez & Marsal’s Steven Kurtz, KKR’s Julia Butler, Canyon Partners Real Estate’s Jacob Feingold, Lee & Associates’ Ben Tapper, IPA’s Max Herzog and Silverstein Properties’ Jonathan Hong
Last Wednesday, Trump unveiled sweeping new tariffs on more than 100 countries that were far more punitive than most expected. A stock market massacre followed, from which real estate owners weren’t spared. In the following two days, $5T of value was erased from S&P 500 companies.
For real estate developers, fears arose over both hard costs in the short term and economic pressures that may impact consumers’ wallets in the longer term.
“A lot of the institutional investment committees are evaluating portfolios across not just real estate exposure. They’re seeing what their portfolios are doing in the public [markets], and that is providing them reason to be cautious,” Canyon Partners Real Estate Head of Originations Jacob Feingold said onstage.
“Real estate is a highly illiquid asset class,” he added. “You’re making a decision today that’s going to stick with you for two, three, four years. It’s not a trade that’s easy to unwind, unlike other kinds of security asset classes.”
Some of the concerns were alleviated a week later when Trump announced a 90-day pause on reciprocal tariffs. Stocks surged in response, with the S&P 500 gaining 9.5% for its best one-day performance since 2008 and the broad market index tracking its third-biggest gain since World War II.
But the excitement was short-lived. Trump kept in place a universal 10% tariff on all countries and escalated his trade war with China, hitting the world’s second-largest economy with a 145% duty on all goods. He also announced 25% tariffs on aluminum, steel and auto parts.
Bisnow/Ciara Long
Belkin, Burden, Goldman LLP’s Craig Price, Bravo Capital’s Aidan Birnbaum, Affinius Capital’s David Greenburg, Ariel Property Advisors’ Matt Dzbanek and Goldman Sachs’ Nitin Jagga
Tariffs on aluminum and steel are especially a concern for real estate due to the impact on construction costs. The FTSE Nareit Equity REITs index ended Thursday down more than 2% and has lost more than 12% of its value in the past six months.
Still, Silverstein Properties Vice President of Development and Acquisitions Jonathan Hong said that the true impact is far from determined.
“There’s probably a handful of projects in New York and around the country that are buying steel up to the quantities that you need to have the material impact of costs,” Hong said. “All of this changed the last 24, 48 hours, and it’ll continue to, so we’re just trying to track how material that change will be.”
Still, when asked what those sitting at the closing table should do at this moment, the more than a dozen lenders and investors who spoke at the event agreed that borrowers should keep forging ahead.
“Our business tends to be market-driven, and during tough times, where it is right now [with] the volatility, these are difficult conversations,” Jagga said. “If something is an offer, always take it.”