Trophy assets might not provide the optimal investment return, given the commotion of the past several years. Instead, Berkadia suggests giving more consideration to Class B.
Whether due to its luster wearing off or its leveraged returns have the least cushion to withstand higher interest rates, Class A's pricing premium has eroded to just 32 basis points and 42 basis points versus Class B and Class C properties, respectively," according to a new report from Berkadia.
Class A has been particularly sensitive to changes in the underlying market during the past three and a half years. Its best performance occurred when the market was most supportive, but it returned relatively lackluster results when the market was under pressure – exhibiting the most systematic risk, Berkadia said.
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