"It's much more compelling really since the first quarter of 2022, to be invested in credit vs. taking on that last dollar equity risk across all property types," Friedman said. "There's no question offices are going through secular distress, but most real estate is going through balance sheet distress."
That distress, which was created by the Federal Reserve's rapid increases in the federal funds rate in 2022 and the first half of 2023, has created a significant opportunity set, Friedman said.
"Most groups really bought assets when interest rates were under a totally different thought process where the 10-year Treasury rate was, you know, on average over the last 12 years, it was roughly about 2% or 2.2%. Today, the 10-year Treasury is about 4%," he said.
Friedman said that is "super critical," given that he and his firm believe the 10-year Treasury rate is going to stay elevated and closer to 4% than reverting back to the much lower rates of the prior decade.
"If that's the case, we think clearly there's been a reset in real estate prices that we think will continue to exist," Friedman said. "And potentially there's even more repricing risk across certain property types, especially the lower-cap rate assets like a multifamily asset where risk premium spreads may start widening out a bit and going back to historical ranges as the market sort of clears."
"With it being said, we are very active in direct lending, trying to buy debt across all property types to take advantage of that dislocation in the credit markets," he said.
Friedman also noted that while it is very challenging to find assets that make sense on the equity side, he said the firm is still opportunistically looking to acquire hotels and is specifically finding great opportunities on the development side.
This is "because most groups can't develop in this environment because they can't get their debt capital, they can't raise the equity, and that's allowing us to step in."
Peachtree Group has about $5 billion in assets under management, of which about half is in equity AUM.