Treasury management in the real estate sector is becoming increasingly critical, especially in the current high interest environment. High interest rates introduce new risks, as well as new opportunities. To preserve enterprises and protect them from excess risk, CFOs, controllers, and treasurers must maintain up-to-date insights into their aggregate cash balances, across accounts, banks, and investments. At the same time, financial managers must also take advantage of opportunities that the current environment has enabled.

The current interest environment is the outcome of COVID-era monetary policy that fueled an unprecedented bubble in asset prices. COVID-era government stimulus policies expanded the US money supply by providing subsidies to households and businesses. This expansion in money supply was exacerbated by historically low interest rates, which fueled borrowing. The increased availability of cash led to a wave of inflation, which grew to 8% in 2022, more than double the average since 1960. In response, the Fed raised interest rates, and the period of high interest ensued.

High interest rates pose significant challenges in the real estate industry, which have perplexed CFOs, controllers, and treasures alike. Real estate is highly dependent on debt, and the viability of an investment, whether it’s a new development or an acquisition, is sensitive to the debt service. Some investments have been paused due to the cost of capital, and others have slowed down as sponsors search for loan terms that make their investments viable. Projects requiring refinancing have been particularly problematic as investors search for equity capital to reduce loan amounts to levels that are supported by revenues. Financial managers have had to be judicious to allocate precious capital wisely to the projects requiring capital most urgently to remain viable.