July 23, 2025 • 9 mins
Ballast Rock Asset Management, the $600 million registered investment advisor, sees interest rates staying higher for longer in the United States. The firm says multifamily technical indicators remain strong relative to other real estate asset classes with new-unit deliveries in 2026 expected to be half of the 10-year average, while the capacity to support higher rents remains robust after years of wage growth.
Thomas Carroll, the founder and CEO of Ballast Rock, examines the market forces affecting US housing, and offers his take on several alternative investment strategies. Tom speaks with Tim Stenovec and Carol Massar on Bloomberg Businessweek Daily.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. You're listening to Bloomberg
Business Week with Carol Masser and Tim Stenoveek on Bloomberg Radio. Well,
Dr Horden now with earnings rallying as much as fifteen
percent and top gainer in the S and P five
hundred from the Oval Office today, the President took a
(00:22):
question asking about the possibility of having no tax on
capital gains on homes, and the President said, he's thinking
about it.
Speaker 2 (00:30):
Who would also unleash you just by lowering the interest rates?
If the Fed would lower the rates, we wouldn't even
have to do that. But we are thinking about no
tax on capital gains on houses.
Speaker 1 (00:40):
No tax on capital gains on houses.
Speaker 3 (00:42):
Carol, now, sign me up.
Speaker 1 (00:43):
Yeah you're gonna say that.
Speaker 2 (00:45):
I'm sorry.
Speaker 1 (00:45):
You can sell the house, keep the money and then yeah,
where you're gonna live? Okayyah, buy another house? Then yeah,
I hear you. Okay, Well, let's talk housing in the US.
Back with us is Thomas Carroll, founder and CEO of
ballast Rock Asset Management. The firm's got about six hundred
million dollars in AUM. It focuses on multi family real
estate and also on private Equity Thomas back here with
us in the Bloomberg Interactive Brokers studio. Welcome back. It's
(01:08):
good to see you.
Speaker 2 (01:09):
It's been a way to see you too, Thanks so much,
Carolyn Tim.
Speaker 1 (01:12):
How is the environment right now? Because the President has
been on this lower the rates, Lower the rates, lower
this rates train for months, is that preventing you from
actually doing any multi family building?
Speaker 2 (01:27):
Yes, insomuch as the industry as a whole has been
white knuckling, I would say with an expectation of rates
coming down, they've been white knuckling the sale of assets.
We're primarily in the secondary market rather than developing specifically
in multi family.
Speaker 1 (01:45):
But you still have to do a lot of work
to those multi family.
Speaker 2 (01:47):
Absolutely, we're doing massive renovations and so inflationary costs around
that material, etc. But yes, the rates environment has had
a tremendous effect on the multi family market. And until
rates come significantly lower or sellers reprice in a material way,
then it's tough for the mark to get started again.
Speaker 3 (02:08):
That's what I want to ask you. If we just know,
all right, the Fed's on hohole, because this is what's
the policy that makes sense for the next six to
twelve months, then folks are going to do deals. Right,
It's like having some clarity because historically we're still at
a lower rate environment we've had much higher rates, And
I guess my point is, are people just looking for
(02:28):
clarity on what the policy is and there's just between
the back and forth between the White House and pressure
on Fetcher J. Powell and maybe folks thinking that that
could ultimately lead to high lower rates. I mean that
uncertainty essentially, and at the same time tariffs which are
putting another layer of uncertainty. So we just the Fed
(02:50):
doesn't know exactly what the environment's going to be, so
they're on hold. So if at some point we have
more clarity and the Fed says no economy growing, we're
doing good Thomas that, then people say, well, this is
the environment, so we'll reprice and we can do stuff
when move ahead. I sorry, there's a long way of saying, well, clarity.
Speaker 2 (03:08):
Yes, indeed, clarity would be extremely helpful, and perhaps you
would have some owners be willing to transact. Again, However,
a lot of owners still, you know, asset holders still
have twenty twenty one and peak pricing in mind, and
so it's hard to let go. It's hard to reprice
an asset lower, especially an income generating asset. Because they're
(03:32):
income generating, you can hold on to them far, far,
far longer than you would be able to otherwise, even
if pricing theoretically should be lower if you were to sell,
but you don't sell, you just hold onto it for
years longer. But yes, hopefully greater clarity would be useful,
but I would not say we're in a particularly clear
environment right now. So clarity is not there, And so
(03:55):
volumes in terms of secondary market volume four commercial real
estate in general is substantially lower than it was at
the peak.
Speaker 1 (04:04):
So what are you doing? Are you not buying anything
right now?
Speaker 2 (04:07):
So we are not buying a lot right now. No,
the only deals that we're doing are situations where the
seller is genuinely in distress. So if there's not outright distress,
it's very very hard to make the numbers pencil. And
what we're focusing on instead is actually where the big
beautiful Bill has created a short term window of opportunity,
which is solar development.
Speaker 1 (04:28):
Interestingly enough, this is what I'm glad we were talking
about this. It was in the notes, and our producer
already said this on the phone, and I was thinking
about solar. Yeah, because the concern, and we saw this
play out in the public markets, was that solar companies
would get hit hard as a result of this bill.
And they've been under a lot of pressure. Where are
you seeing opportunity?
Speaker 2 (04:49):
They have been hit hard, and there is really very
limited window for opportunity. So it's not great if you're
full time in that business. But for us, we're a
private credit lender to solar developers that might have a
twenty or thirty development pipeline of projects, and it enables
us as a lender to step in on a senior
(05:10):
secured basis and identify and cherry pick really the best,
most actionable, immediately actionable projects where we can get shovel
in the ground right now and and bring these projects
to fruition because very shortly any investment tax credits are
going to disappear. So it is about a short term
window and for us, the opportunity is as a lender,
(05:33):
absolutely this bill has been extremely problematic for the development
industry and for a generation of solar power in the
United States.
Speaker 3 (05:41):
How short term and what are their terms looking like?
Speaker 2 (05:44):
So we need shovels in the ground this year or
by the middle of next year if there is no
foreign content and we need completion of the project by
the end of twenty twenty seven. Some of the rules
are still to be finalized. Actually, the Big Beautiful Bill
obviously passed on the fourth of July, but a week
later the Trump administration issued in executive order that the
(06:08):
IRS has forty five days to clarify the rules. So,
interestingly enough, we're playing by a rule book that we
don't fully have the details for.
Speaker 3 (06:15):
You talked about lack of clarity correctly hits a lot
of different areas, that's right.
Speaker 2 (06:20):
But there is opportunity there in the short to medium
term for us to help those small to medium size
developers bring those rapidly deployable projects where we can get
energy to the grid before the end of twenty twenty
seven online immediately. But they need capital and they're very
profitable when you do it, And that's that's where we
see the short term opportunity in development.
Speaker 1 (06:41):
Then do these product projects go poof.
Speaker 2 (06:44):
Well, no, the project will last for twenty that's it.
If you have a thirty project pipeline, you might have
five that you can bring to fruition. You might have
twenty five.
Speaker 1 (06:54):
That go poof all because of tax credits.
Speaker 2 (06:56):
Correct. Now, there will be major changes that are going
to the cost of construction for solar projects. The EPC
construction costs are highly likely over time to come down
because if there's less development going on, those construction companies
will reduce their costs. So there'll be opportunities there. There
will also be opportunities for states that want to continue
(07:20):
to incentivize solar to step in and provide credits where
the federal government steps out. And then finally, the utilities themselves,
which at the moment use the interconnection fee and other
aspects of solar development to make money, they will probably
compress their margins as well. So there are a number
of different moving levers. And then ultimately the cost of
electricity is going to go up. Well, that's and that's
(07:42):
going to be a huge driver of value.
Speaker 3 (07:44):
This is what I wanted to ask you, What are
the projects that you are investing in?
Speaker 2 (07:48):
So the projects that we're lending money to are lending
to forgive me exactly for clarity. We're a private credit
fund that lends money rather than investing equity. But those
projects are low utility grade. They're what are called community solar,
so they're usually in the five to fifty megawatt project size,
whereas community solar really kicks excuse me, utility grade kicks
(08:12):
in above about one hundred megawatts. Those projects because they
are much more challenging and time consuming to execute, a
lot of those have gone, to use your words, whoof
because they can't be delivered in that timeframe. So there
is a massive change in the demand, as we know
(08:32):
for solo as a result of AI for electricity in general,
but now there's a material change in supply for the negative.
Speaker 1 (08:41):
Before we let you go back to your focus on
multifamily in the past, you've been on with us and
you've spoken excitedly about the Sun Belt. Where geographically are
you thinking for opportunity now?
Speaker 2 (08:54):
We continue to see a lot of opportunity in small
to medium sized cities across the southeast, the Carolinas, Georgia,
where these right to work states where we're seeing a
lot of new battery factories and other new factories being built.
It's those small to medium sized markets where we continue
(09:14):
to see a growth in demand, an increase in wages,
and increase in job opportunities and we're there to do
our best to support that with housing.
Speaker 3 (09:23):
How would you describe the economy? Just real quickly twenty seconds.
Speaker 2 (09:27):
Strong jobs market, but a lot of lack of clarity
around issues such as tariffs and rates that have that
make it challenging for long term deployment of capital.
Speaker 3 (09:37):
All right, interesting, So it sounds like potentially a lot
of stuff sitting on the sidelines, just waiting we see clarity.
Speaker 2 (09:43):
Certainly.
Speaker 3 (09:44):
All right, good to check in with you. Thank you
for coming in, Thank you, Yeah, appreciate it. Thomas Carrol,
he's founder and chief executive officer of ballast Rock Asset Management,
joining us right here in our Bloomberg Interactive Broker Studio
Bloomberg Audio Studios, Podcasts, radio News. You're listening to Bloomberg
Business Week with Carol Masser and Tim Stenoveek on Bloomberg Radio. Well,
Dr Horden now with earnings rallying as much as fifteen
percent and top gainer in the S and P five
hundred from the Oval Office today, the President took a
(00:22):
question asking about the possibility of having no tax on
capital gains on homes, and the President said, he's thinking
about it.
Speaker 2 (00:30):
Who would also unleash you just by lowering the interest rates?
If the Fed would lower the rates, we wouldn't even
have to do that. But we are thinking about no
tax on capital gains on houses.
Speaker 1 (00:40):
No tax on capital gains on houses.
Speaker 3 (00:42):
Carol, now, sign me up.
Speaker 1 (00:43):
Yeah you're gonna say that.
Speaker 2 (00:45):
I'm sorry.
Speaker 1 (00:45):
You can sell the house, keep the money and then yeah,
where you're gonna live? Okayyah, buy another house? Then yeah,
I hear you. Okay, Well, let's talk housing in the US.
Back with us is Thomas Carroll, founder and CEO of
ballast Rock Asset Management. The firm's got about six hundred
million dollars in AUM. It focuses on multi family real
estate and also on private Equity Thomas back here with
us in the Bloomberg Interactive Brokers studio. Welcome back. It's
(01:08):
good to see you.
Speaker 2 (01:09):
It's been a way to see you too, Thanks so much,
Carolyn Tim.
Speaker 1 (01:12):
How is the environment right now? Because the President has
been on this lower the rates, Lower the rates, lower
this rates train for months, is that preventing you from
actually doing any multi family building?
Speaker 2 (01:27):
Yes, insomuch as the industry as a whole has been
white knuckling, I would say with an expectation of rates
coming down, they've been white knuckling the sale of assets.
We're primarily in the secondary market rather than developing specifically
in multi family.
Speaker 1 (01:45):
But you still have to do a lot of work
to those multi family.
Speaker 2 (01:47):
Absolutely, we're doing massive renovations and so inflationary costs around
that material, etc. But yes, the rates environment has had
a tremendous effect on the multi family market. And until
rates come significantly lower or sellers reprice in a material way,
then it's tough for the mark to get started again.
Speaker 3 (02:08):
That's what I want to ask you. If we just know,
all right, the Fed's on hohole, because this is what's
the policy that makes sense for the next six to
twelve months, then folks are going to do deals. Right,
It's like having some clarity because historically we're still at
a lower rate environment we've had much higher rates, And
I guess my point is, are people just looking for
(02:28):
clarity on what the policy is and there's just between
the back and forth between the White House and pressure
on Fetcher J. Powell and maybe folks thinking that that
could ultimately lead to high lower rates. I mean that
uncertainty essentially, and at the same time tariffs which are
putting another layer of uncertainty. So we just the Fed
(02:50):
doesn't know exactly what the environment's going to be, so
they're on hold. So if at some point we have
more clarity and the Fed says no economy growing, we're
doing good Thomas that, then people say, well, this is
the environment, so we'll reprice and we can do stuff
when move ahead. I sorry, there's a long way of saying, well, clarity.
Speaker 2 (03:08):
Yes, indeed, clarity would be extremely helpful, and perhaps you
would have some owners be willing to transact. Again, However,
a lot of owners still, you know, asset holders still
have twenty twenty one and peak pricing in mind, and
so it's hard to let go. It's hard to reprice
an asset lower, especially an income generating asset. Because they're
(03:32):
income generating, you can hold on to them far, far,
far longer than you would be able to otherwise, even
if pricing theoretically should be lower if you were to sell,
but you don't sell, you just hold onto it for
years longer. But yes, hopefully greater clarity would be useful,
but I would not say we're in a particularly clear
environment right now. So clarity is not there, And so
(03:55):
volumes in terms of secondary market volume four commercial real
estate in general is substantially lower than it was at
the peak.
Speaker 1 (04:04):
So what are you doing? Are you not buying anything
right now?
Speaker 2 (04:07):
So we are not buying a lot right now. No,
the only deals that we're doing are situations where the
seller is genuinely in distress. So if there's not outright distress,
it's very very hard to make the numbers pencil. And
what we're focusing on instead is actually where the big
beautiful Bill has created a short term window of opportunity,
which is solar development.
Speaker 1 (04:28):
Interestingly enough, this is what I'm glad we were talking
about this. It was in the notes, and our producer
already said this on the phone, and I was thinking
about solar. Yeah, because the concern, and we saw this
play out in the public markets, was that solar companies
would get hit hard as a result of this bill.
And they've been under a lot of pressure. Where are
you seeing opportunity?
Speaker 2 (04:49):
They have been hit hard, and there is really very
limited window for opportunity. So it's not great if you're
full time in that business. But for us, we're a
private credit lender to solar developers that might have a
twenty or thirty development pipeline of projects, and it enables
us as a lender to step in on a senior
(05:10):
secured basis and identify and cherry pick really the best,
most actionable, immediately actionable projects where we can get shovel
in the ground right now and and bring these projects
to fruition because very shortly any investment tax credits are
going to disappear. So it is about a short term
window and for us, the opportunity is as a lender,
(05:33):
absolutely this bill has been extremely problematic for the development
industry and for a generation of solar power in the
United States.
Speaker 3 (05:41):
How short term and what are their terms looking like?
Speaker 2 (05:44):
So we need shovels in the ground this year or
by the middle of next year if there is no
foreign content and we need completion of the project by
the end of twenty twenty seven. Some of the rules
are still to be finalized. Actually, the Big Beautiful Bill
obviously passed on the fourth of July, but a week
later the Trump administration issued in executive order that the
(06:08):
IRS has forty five days to clarify the rules. So,
interestingly enough, we're playing by a rule book that we
don't fully have the details for.
Speaker 3 (06:15):
You talked about lack of clarity correctly hits a lot
of different areas, that's right.
Speaker 2 (06:20):
But there is opportunity there in the short to medium
term for us to help those small to medium size
developers bring those rapidly deployable projects where we can get
energy to the grid before the end of twenty twenty
seven online immediately. But they need capital and they're very
profitable when you do it, And that's that's where we
see the short term opportunity in development.
Speaker 1 (06:41):
Then do these product projects go poof.
Speaker 2 (06:44):
Well, no, the project will last for twenty that's it.
If you have a thirty project pipeline, you might have
five that you can bring to fruition. You might have
twenty five.
Speaker 1 (06:54):
That go poof all because of tax credits.
Speaker 2 (06:56):
Correct. Now, there will be major changes that are going
to the cost of construction for solar projects. The EPC
construction costs are highly likely over time to come down
because if there's less development going on, those construction companies
will reduce their costs. So there'll be opportunities there. There
will also be opportunities for states that want to continue
(07:20):
to incentivize solar to step in and provide credits where
the federal government steps out. And then finally, the utilities themselves,
which at the moment use the interconnection fee and other
aspects of solar development to make money, they will probably
compress their margins as well. So there are a number
of different moving levers. And then ultimately the cost of
electricity is going to go up. Well, that's and that's
(07:42):
going to be a huge driver of value.
Speaker 3 (07:44):
This is what I wanted to ask you, What are
the projects that you are investing in?
Speaker 2 (07:48):
So the projects that we're lending money to are lending
to forgive me exactly for clarity. We're a private credit
fund that lends money rather than investing equity. But those
projects are low utility grade. They're what are called community solar,
so they're usually in the five to fifty megawatt project size,
whereas community solar really kicks excuse me, utility grade kicks
(08:12):
in above about one hundred megawatts. Those projects because they
are much more challenging and time consuming to execute, a
lot of those have gone, to use your words, whoof
because they can't be delivered in that timeframe. So there
is a massive change in the demand, as we know
(08:32):
for solo as a result of AI for electricity in general,
but now there's a material change in supply for the negative.
Speaker 1 (08:41):
Before we let you go back to your focus on
multifamily in the past, you've been on with us and
you've spoken excitedly about the Sun Belt. Where geographically are
you thinking for opportunity now?
Speaker 2 (08:54):
We continue to see a lot of opportunity in small
to medium sized cities across the southeast, the Carolinas, Georgia,
where these right to work states where we're seeing a
lot of new battery factories and other new factories being built.
It's those small to medium sized markets where we continue
(09:14):
to see a growth in demand, an increase in wages,
and increase in job opportunities and we're there to do
our best to support that with housing.
Speaker 3 (09:23):
How would you describe the economy? Just real quickly twenty seconds.
Speaker 2 (09:27):
Strong jobs market, but a lot of lack of clarity
around issues such as tariffs and rates that have that
make it challenging for long term deployment of capital.
Speaker 3 (09:37):
All right, interesting, So it sounds like potentially a lot
of stuff sitting on the sidelines, just waiting we see clarity.
Speaker 2 (09:43):
Certainly.
Speaker 3 (09:44):
All right, good to check in with you. Thank you
for coming in, Thank you, Yeah, appreciate it. Thomas Carrol,
he's founder and chief executive officer of ballast Rock Asset Management,
joining us right here in our Bloomberg Interactive Broker Studio
Hosts And Creators
Tim Stenovec
Carol Massar
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