The Real Estate Market Watch - current events through a real estate lens.

When workout specialist Norman Radow sat across from a developer who'd just lost a half-billion-dollar condo project in LA and asked what he'd change, the developer pounded the table, "I wouldn't change a thing. I did everything right!" That's when Norman knew exactly why he was there. Norman Radow is CEO of The RADCO Companies, an Atlanta-based opportunistic real estate firm that has acquired, invested in, and operated over 30,000 multifamily units across 15 markets and completed more than 100 deals totaling $3.3 billion over the past decade. But his story begins earlier – as Lehman Brothers' off-balance-sheet workout specialist, where he earned the title "workout king" from The New York Times in 2009 after unwinding some of the most complex distressed assets in modern real estate history. In this conversation, Norman shares battle-tested wisdom from three decades of buying buildings nobody else wanted – from the savings and loan crisis through the GFC to today's market paralysis. Five questions answered: Why did Norman wait three years to get back into the distress game – and what finally triggered his return? What do ALL failed condo projects he studied have in common? (Hint: it's not what you think.) Why are banks giving free extensions to sponsors with "unclean hands" instead of bringing in fresh operators? Where is institutional capital flowing right now – and why non-institutional investors shouldn't compete there. What's the real story behind "extend and pretend" 2.0? If you're trying to make sense of today's multifamily market – the disconnect between debt and equity, why distressed deals aren't trading, and where smart money should position for the next 24-36 months – this delivers hard-earned pattern recognition from someone who's seen this movie before. *** In this series, I cut through the noise to examine how shifting macroeconomic forces and rising geopolitical risk are reshaping real estate investing. With insights from economists, academics, and seasoned professionals, this show helps investors respond to market uncertainty with clarity, discipline, and a focus on downside protection. Subscribe to my free newsletter for timely updates, insights, and tools to help you navigate today’s volatile real estate landscape. You’ll get: Visit GowerCrowd.com/subscribe Email: adam@gowercrowd.com Call: 213-761-1000

My guest today is David Lynn, PhD — CEO of Unity Investment Management, a private-equity real-estate firm with nearly $1 billion AUM across 74 medical outpatient buildings nationwide. A London School of Economics PhD and MIT MBA, David cuts through macro confusion with a steady, data-driven view of where capital and demographics are really pulling the market. Driving Thesis: America’s aging population and the rise of personalized medicine, longevity science, and AI diagnostics are reshaping health-care real estate. Telehealth doesn’t kill in-person visits — it creates more of them. And as construction costs rise and MOB supply stays tight, low-beta sectors like medical outpatient buildings are poised to outperform high-volatility multifamily and office assets. Why it matters: We’re entering a post-banquet cycle — after 15 years of ultra-cheap debt and compressed cap rates. David argues that the “easy-money era” is over, but patient investors still win through cash-flow discipline and blend-and-extend lender relationships. Medical tenants are non-discretionary and financially stable; that stability will anchor returns as rates ease and capital markets thaw. Five questions David answers: Why MOBs held their value while multifamily stumbled. How telemedicine actually drives physical visits. What AI and genomics mean for future space demand. Where we are in the cap-rate cycle (and why this may be the bottom). How tariffs, immigration, and Fed policy feed through to CRE pricing. Takeaways for sponsors & LPs: • Favor low-volatility sectors with durable cash flow. • Shorter leases can beat inflation without adding risk. • Blend and extend — don’t panic-sell distress. • Watch employment and energy as deflationary signals. • AI and aging will drive demand more than interest rates. If you believe steady beats speculative, this episode maps how to navigate the new cycle with a scientist-investor’s lens — one rooted in data, discipline, and durable demand. David Lynn is that rare voice who bridges macro economics and boots-on-the-ground real estate with clarity and calm. *** In this series, I cut through the noise to examine how shifting macroeconomic forces and rising geopolitical risk are reshaping real estate investing. With insights from economists, academics, and seasoned professionals, this show helps investors respond to market uncertainty with clarity, discipline, and a focus on downside protection. Subscribe to my free newsletter for timely updates, insights, and tools to help you navigate today’s volatile real estate landscape. You’ll get: Visit GowerCrowd.com/subscribe Email: adam@gowercrowd.com Call: 213-761-1000

My guest today is Ryan Severino, Chief Economist & Head of Research at private equity real estate shop, BGO ($89 billion of AUM), who cuts through the macro noise with a practical roadmap for real estate sponsors and their investors. Driving Thesis: A new administration: slower immigration, volatile trade policy, and accelerating AI. These three forces are reshaping growth, hiring, space demand, and cap rates. If you’re waiting for “inflation down → all clear,” you’ll miss the real drivers. Why it matters: The biggest hit was capital-markets math. If the Fed guides toward neutral (where the Fed’s actions neither stimulate nor restrains economic growth) and the long end eases (10/30 year treasury yields come down), origination, transactions, and pricing can recover faster than fundamentals. Durable investment returns still come down to labor, not inflation headlines. Five questions Ryan answers: Today’s savvy investors should be looking at what? What is the cleanest macro signal for CRE? Tariffs vs. uncertainty; what’s worse? Rate cuts: boon or “sugar rush”? Where will AI hit property first? Takeaways for sponsors & LPs: Underwrite to jobs, not CPI (inflation) chatter. Get hyper-local; this is a geography-led cycle. Favor durable demand pools (workforce housing). Expect a capital-markets thaw before a fundamental boom. Treat uncertainty as baseline; build flexibility into debt and expand equity capital sources. If you’re separating signal from noise, this episode re-anchors the playbook: watch payrolls, heed forward guidance, underwrite locally, own real demand. According to ChatGPT’s analysis of Ryan’s historical predictions, he has ‘called the cycle's shape better than most; no overreaction to inflation, no premature recession warnings, and consistent recognition of labor market strength and capital flow dynamics. That’s a rare track record, especially in a market where even top-tier macro shops have missed big turns.’ Ryan’s the real deal – hardly any wonder he’s Chief Economist at an $89 billion AUM shop. *** In this series, I cut through the noise to examine how shifting macroeconomic forces and rising geopolitical risk are reshaping real estate investing. With insights from economists, academics, and seasoned professionals, this show helps investors respond to market uncertainty with clarity, discipline, and a focus on downside protection. Subscribe to my free newsletter for timely updates, insights, and tools to help you navigate today’s volatile real estate landscape. You’ll get: Visit GowerCrowd.com/subscribe Email: adam@gowercrowd.com Call: 213-761-1000

Erica Groshen knows what’s behind the numbers. She served as the 14th Commissioner of the Bureau of Labor Statistics and a Vice President at the New York Fed. The BLS is rarely in the headlines but political assaults on its independence have suddenly made its work front-page news. At stake: whether the data that guide trillions in investment and policy decisions can still be trusted. In our conversation, Erica and I explored five questions that matter not just for CRE professionals, but for anyone trying to make sense of today’s economy: This isn’t an abstract debate. For commercial real estate, cap rates, borrowing costs, and deal structures all trace back to the business cycle - and that cycle is measured first and foremost by BLS data. If you want to look beyond today’s headlines and hear why institutional trust translates directly into your cost of capital — this is the episode to listen to. *** In this series, I cut through the noise to examine how shifting macroeconomic forces and rising geopolitical risk are reshaping real estate investing. With insights from economists, academics, and seasoned professionals, this show helps investors respond to market uncertainty with clarity, discipline, and a focus on downside protection. Subscribe to my free newsletter for timely updates, insights, and tools to help you navigate today’s volatile real estate landscape. You’ll get: Visit GowerCrowd.com/subscribe Email: adam@gowercrowd.com Call: 213-761-1000

Greg MacKinnon is Director of Research at the Pension Real Estate Association (PREA), where he updates the world’s largest institutional investors on portfolio construction, risk, and strategy. His is a vantage point most sponsors never get to hear directly. In this conversation, Greg and I revisited our conversation from two weeks ago to drill deeper into the housing market. His thesis is simple but surprising: the capital flows and risk assessments at the very top of the pyramid are being reshaped by renter bifurcation and the economics of affordability. Here are five questions Greg answered that every serious CRE professional should consider: Greg’s insights are drawn from the institutional world, where the stakes are measured in billions and the lens is long-term risk management. For sponsors and operators, listening in offers a rare chance to see how these investors are evaluating markets - and to align your own strategies accordingly. *** In this series, I cut through the noise to examine how shifting macroeconomic forces and rising geopolitical risk are reshaping real estate investing. With insights from economists, academics, and seasoned professionals, this show helps investors respond to market uncertainty with clarity, discipline, and a focus on downside protection. Subscribe to my free newsletter for timely updates, insights, and tools to help you navigate today’s volatile real estate landscape. You’ll get: Visit GowerCrowd.com/subscribe Email: adam@gowercrowd.com Call: 213-761-1000

Reid Bennett knows multifamily. As National Council Chair of Multifamily at SVN and a 24-year broker across market-rate, workforce, and affordable housing, he’s completed hundreds of transactions and advised lenders on more than 450 broker opinions of value (BOV) in just the past 18 months. In my recent conversation with him, Reid cuts through the noise to explain what’s really happening in multifamily and why sponsors and investors need to pay attention. Here are five big questions he answers: Are the 450+ BOVs a sign that distress is about to hit multifamily, or just lenders marking time? Why are occupancies still in the mid-90s when everything else in the economy feels shaky? What’s crushing NOI faster - insurance, property taxes, or payroll? How should investors think about workforce housing as a long-term hedge against oversupply at the top end? Why do Class A buildings show concessions while B and C rents remain sticky, and how does new supply really solve affordability? This isn’t 2009, but it isn’t 2021 either. Reid explains why today’s market feels like a slow-motion reset and what signals to watch if you want to stay ahead. Tune in to hear Reid’s unvarnished take. *** In this series, I cut through the noise to examine how shifting macroeconomic forces and rising geopolitical risk are reshaping real estate investing. With insights from economists, academics, and seasoned professionals, this show helps investors respond to market uncertainty with clarity, discipline, and a focus on downside protection. Subscribe to my free newsletter for timely updates, insights, and tools to help you navigate today’s volatile real estate landscape. You’ll get: Visit GowerCrowd.com/subscribe Email: adam@gowercrowd.com Call: 213-761-1000

A Banker’s Memory Is a Sponsor’s Edge Brad Andrus isn’t just another operator in today’s market. He’s the co-founder of Northbridge Commercial Real Estate and a former community-bank lender who cut his teeth during the 2008 crisis. That experience shaped the conservative, cash-flow-first discipline he brings to self-storage, office, and industrial deals across DFW today. In this episode, Brad lays out why sponsors who master operating discipline—not market timing—win when capital is cautious and debt is expensive. Here are 5 questions he answers that every sponsor and investor should be paying attention to right now: How do you structure debt so it survives a cycle—even if growth underwhelms? Why are community banks still the hidden edge for sponsors, even in today’s tighter credit regime? What’s the new investor mindset after 2021–2023’s write-downs and capital calls? How do you play offense in self-storage when household mobility (and move-ins) slows down? What really earns sponsors repeat checks from equity investors in 2024–2025? Brad’s through-line is refreshingly clear: lower leverage, cash-flow bias, relationship banking, and transparent communication. For anyone raising capital or allocating into deals right now, his insights are a blueprint for surviving—and compounding—across market cycles. *** In this series, I cut through the noise to examine how shifting macroeconomic forces and rising geopolitical risk are reshaping real estate investing. With insights from economists, academics, and seasoned professionals, this show helps investors respond to market uncertainty with clarity, discipline, and a focus on downside protection. Subscribe to my free newsletter for timely updates, insights, and tools to help you navigate today’s volatile real estate landscape. You’ll get: Visit GowerCrowd.com/subscribe Email: adam@gowercrowd.com Call: 213-761-1000

Institutional CRE investing: A market run by allocation math – and uncertainty My podcast/YouTube guest today is Greg MacKinnon, Director of Research at the Pension Real Estate Association (PREA). PREA represents the institutional real estate community - think pension funds, sovereign wealth funds, endowments, and other fiduciaries managing hundreds of billions on behalf of millions of beneficiaries. These are the investors who typically allocate to real estate as part of their overall investment portfolios and who set the tone for how capital flows through the entire real estate market. Greg explains how while institutional real estate remains a roughly 10% sleeve in diversified institutional portfolios, the number matters less than the mechanics behind it. When equities rally and private values fall, the real estate slice shrinks—creating a theoretical bid to “rebalance” back to target. In practice, that bid has been clogged by a fund-recycling problem: closed-end vehicles haven’t been returning capital as quickly because exits have slowed, which leaves investors waiting for distributions before recommitting. Until that dam breaks more broadly, new capital formation into private real estate remains inconsistent across strategies and managers. Office: price discovery by compulsion Institutional portfolios built in a world where office was a core holding are still working through the repricing. Unlevered office values are down on the order of ~40% from pre-COVID peaks nationally; with leverage, many positions are effectively wiped out, explaining why owners resist selling and why trades are scarce. That stasis is ending as lenders tire of “extend and pretend,” loan maturities arrive, and forced decisions accelerate. The practical question for CIOs isn’t simply “hold or sell” but how fast to harvest, return, and re-underwrite risk elsewhere. Expect more office volume but much of it distress-driven rather than conviction buying. The rate cut mirage: CRE runs on growth and the 10-year Market chatter obsesses over the next Fed move. Institutional capital takes a broader view. The cost of capital that matters for underwriting – term debt, cap-rate anchoring, discount rates – is tethered more to the 10-year Treasury than the overnight Fed funds rate. A policy cut can coexist with a higher 10-year if inflation risk re-prices, blunting any “cuts are bullish” narrative. More importantly: CRE performance tracks the real economy’s breadth and durability. Historically, rising interest rates often coincide with strong growth and healthy real estate. Falling rates tend to arrive with deceleration, which is why “cuts” are not automatically good news for NOI or values. Underwrite your forward cash flows, not the headline. Policy risk is now an underwriting line item Global capital has long treated the U.S. as the default safe harbor. That advantage compresses when macro policy feels unpredictable – tariffs one week, reversals the next, and public debate over central-bank independence. Some non-U.S. allocators have simply chosen not to live with the noise premium, shifting incremental dollars to Europe. Domestic institutions aren’t exiting the U.S., but the signal is clear: political-economy volatility now shows up as a higher hurdle rate, more conditional investment committee approvals, and a stronger preference for managers who can navigate policy in both research and structuring. Where the money is actually going Facing actuarial return targets and a cloudy macro, institutions are tilting toward “where alpha lives now”: Digital and specialized industrial: data centers; cold storage; and industrial outdoor storage (IOS) – think secured yards for heavy equipment – where supply is constrained and tenant demand is need-based. Housing adjacencies: single-family rental, manufactured housing, student housing, and seniors housing, plus targeted affordable strategies that can layer policy incentives with operating...

The Signal Beneath the Noise Serious operators obsess over the next print, but my podcast/YouTube guest this week, Bankrate senior economic analyst, Mark Hamrick, argues the industry is missing the structural signals that actually set the cost of capital and shape demand. Start with this premise: Data credibility is a macro variable. When the quality of national jobs and inflation statistics is questioned, it is not just an esoteric Beltway quarrel; it becomes a pricing input for Treasuries and, by extension, mortgages, construction loans and exit cap rates. As Hamrick puts it, the path to good decisions for households, enterprises and policymakers ‘is lined by high quality economic data, most of which is generated by the federal government.’ Hamrick’s concern is not theoretical. He links the chain plainly: if markets doubt the numbers guiding the Federal Reserve’s dual mandate, you can ‘envision a scenario where there’s less demand for our Treasury debt,’ forcing higher yields to clear supply – an economy‑wide tax that lifts borrowing costs from mortgages to autos and narrows the Fed’s room to maneuver. What Happens If Trust Erodes? The near‑term catalyst for this anxiety is unusual: the Labor Department’s head statistician was fired after unfavorable revisions, and an underqualified nominee has floated ideas as extreme as not publishing the data at all. Hamrick’s advice for investors and executives is simple: pay attention. This may not break the system tomorrow, but it introduces risk premia where none previously existed. Through a real estate lens, the translation is straightforward. Underwriting already contends with volatile inputs on rents, expenses and exit liquidity; add a credibility discount on macro data and your discount rate moves against you. Prudent sponsors should stress‑test deals for a modest upward shock in base rates – an echo of Hamrick’s ‘economy‑wide tax’ – and consider how thinner debt markets would propagate through construction starts and refis. Housing’s Lock‑In: Inventory, Not Prices, Is the Release Valve The ‘lock‑in effect’ remains the defining feature of U.S. housing. Owners sitting on sub‑3% mortgages are rationally immobile, starving resale inventory and suppressing household formation mobility, a dynamic Hamrick equates with today’s ‘no hire, no fire’ labor market: stable but sluggish churn. Builders fill some of the gap, but affordability remains constrained by national price firmness and still‑elevated mortgage rates relative to the pandemic trough. What happens if mortgage rates dip to 6.25% or even 5.5%? Don’t expect a binary ‘unlock.’ Hamrick argues for incremental improvement rather than a light switch: lower rates would expand qualification and appetite gradually, and, crucially, free inventory. He is less worried that cheaper financing simply bids up prices; the supply response from would‑be sellers is the more powerful margin effect. For operators underwriting for‑sale housing (build to rent or single-family home developments), the tactical read is to focus on markets where latent move‑up sellers dominate and where new‑home concessions currently set the comp stack. He also reminds us of the persistent, national‑level truth: prices have been unusually firm for years; in the U.S., homeownership is still the primary path to wealth – advantage owners, disadvantage non‑owners. Wealth Transfer: Inequality In, Inequality Out The widely cited $84 trillion Boomer‑to‑GenX/Millennial wealth transfer via inheritance won’t repair the middle class. It will mainly perpetuate asset inequality: assets beget assets, and the recipients most likely to inherit are already nearer the ‘have’ column. That implies continuing bifurcation in housing demand (prime school districts, high‑amenity suburbs) alongside a renter cohort optimizing for cash‑flow goals rather than equity growth. For CRE, that supports a barbell: high‑income suburban nodes + durable rental demand where...

Calm on the Surface, Distress Below: Joe Blackbourn on the State of Sunbelt Multifamily The Eye of the Storm? When my podcast guest this week, Joe Blackbourn, president and founder of Everest Holdings, stepped in front of a room of ULI members in late 2024, he titled his multifamily market forecast “An Underdressed Weatherman Gets Sent Into a Hurricane.” The image was evocative – and accurate. Multifamily investors, developers, and lenders had been navigating gale-force winds of rising rates, inflation shocks, and structural cost resets. And yet, as Blackbourn noted in my conversation with him, today the industry still appears eerily calm. “There’s a lot of stormy weather on the horizon, and, like a hurricane, we don’t know quite where it’s going to land or how bad it’s going to be.” The Invisible Cost of ‘Calm’ Core inflation may be retreating, but the real story, Blackbourn argues, is not about the rate of change. It’s about the baseline shift. “Even if we’re at just over 2% now, it’s still a 30% increase in a very short period of time,” he said, referring to food prices, but with implications for housing as well. Home prices in many U.S. markets, particularly across the Sunbelt, have surged by 30–50% since 2020. That repricing is likely to stick. “It’s really difficult to give that pricing back,” he added. “Short of some real economic calamity, the best we can manage is slower growth, not a decline in consumer pricing.” That same principle is locking up real estate deals. Rent growth has slowed, but operating expenses have not. The result is compressed margins, sluggish NOI, and a widespread inability to transact or refinance. Multifamily: Where Distress Hides Quietly On paper, the multifamily sector looks surprisingly stable. Cap rates for high-quality assets remain in the 5.0%–5.25% range, and transaction volume is beginning to pick up in select markets. But beneath the surface, stress is mounting. “There’s a lot of stress at the balance sheet level,” said Blackbourn. “And it’s not being helped by property-level performance.” In many Sunbelt markets, especially those with pandemic-era construction booms, organic NOI growth is flat or negative. Rent collection is delayed, staffing is inconsistent, and delinquencies are rising. “We’re seeing situations where it’s taking all month to get the rents collected,” he noted. “You’d be at the 15th of the month with less than 50% of rents in the door.” Yet distress sales remain rare. Why? Blackbourn offers two reasons: Lender tactics: Debt funds are “hope-certificating” properties, granting extensions, persuading sponsors to inject capital, and delaying the inevitable. Human psychology: “There’s a survival instinct at work,” he observed. “People will do whatever they can to stay in the game.” What Keeps Deals Frozen? Everyone is waiting. Borrowers, lenders, and investors are all betting on falling interest rates to solve their problems. But Blackbourn remains skeptical. “I don’t think it’s inevitable that rates come down,” he said. “And yet, it’s within the debt fund’s interest to persuade borrowers that they will.” Many current valuations are premised on that hope. But even if rates do drop, the bid-ask spread remains wide. In his words, “It feels like this really taut balloon; fragile.” Why Aren’t Cap Rates Rising Faster? One of the stranger dynamics in today’s market is that cap rates haven’t risen much, despite the Fed holding policy rates above 5%. High-quality assets are still trading at 5%–5.25% caps. How is that possible? “If you have the right basis, you can sell into that,” Blackbourn explained. “The pricing for high-quality assets hasn’t jumped that much.” But for vintage assets, pricing capitulation is coming. Lenders are forcing assets to market when no other solutions are viable. And while buyers are circling, few are pouncing. Supply, Demand, and the Surprise of Absorption Another surprise: absorption is...

A Mild Ending, A Fresh Start: Richard Barkham’s Post-CBRE View of the CRE Market The End of a Cycle - Without the Crash After 40 years in the field and a distinguished final act as Global Chief Economist at CBRE, Richard Barkham’s take on the state of commercial real estate is disarmingly calm. “This has been the mildest end of cycle that we've seen in 40 years – in fact, in my whole career,” he says. Unlike previous downturns - 1989, 2000, 2008 - which were accompanied by macroeconomic crises, today’s cycle-end feels strangely undramatic. Vacancy rates have risen, prices have declined 25-30%, and capital markets activity has bottomed out, but there’s been no systemic financial collapse. Why? In Barkham’s view, the macro cycle hasn’t ended. “We've got the end of a real estate cycle, but no end of the macro cycle.” Yet. This divergence - CRE in a correction, the economy still growing - frames his optimistic outlook for real estate. Stimulus, Not Stability The recent U.S. tax bill has added short-term fuel to the macro picture. Barkham describes it as a “stimulatory” package: it injects fiscal stimulus into an already resilient economy, even if the longer-term consequences include rising national debt and pressure on Treasury yields. "There’s a degree of stimulus in that bill… which will allow a certain amount of certainty, confidence and stimulus to boost growth.” But not all stimulus is equal. Barkham worries that “the higher the debt-to-GDP ratio goes, the more upward pressure there is on the ten-year Treasury,” which forms the basis for CRE pricing. He sees an elevated 10-year yield, anchored in the 4–4.5% range, as a likely headwind for valuations, particularly for highly levered deals. Still, he believes the U.S. economy can absorb this, at least for now. “The U.S. isn’t going to fall over,” he says. “The tax bill will boost growth, but it will also keep the ten-year Treasury elevated.” Banks Are Lending Cautiously Contrary to headlines about a $950 billion wall of maturities and doom-laden refinancing cliffs, Barkham is sanguine about debt markets. He credits both the structural health of CRE and the Fed’s deft handling of last year’s banking turbulence. “Banks have been very, very unwilling to take loans back,” he explains. “Where assets can still service loans, banks have been willing to extend… There might have been some cash in refinancing, but the wall of debt is a non-issue, frankly.” Even deregulation in the new tax bill could loosen credit conditions further. Barkham predicts larger banks will expand their share of real estate lending as capital requirements ease. “That just broadens the source of debt, which is good for market liquidity,” he says. The Start of a New Real Estate Cycle While macro conditions may be mid-to-late cycle, CRE is in Barkham’s view at the start of a new cycle. The real estate cycle that began in 2014 has ended, and signs of early recovery - vacancy stabilization, limited new construction, and a flight to quality - are evident. “You’ve got all the inventory from the last cycle… people are moving into newer, better assets,” he says. “Eventually, when that runs out, new development resumes. But we’re not there yet.” He sees real estate as “very investable right now,” particularly for those concerned about inflation. “If we are in a higher inflation environment - with the stimulus, with the pressure on the Fed politically to bring down interest rates - then I think it’s a good time to invest in real estate.” Inflation, Interest Rates, and the Fed’s Delicate Dance Barkham’s macroeconomic outlook is nuanced. While he acknowledges the Fed may eventually ease, trade tariffs and domestic manufacturing policies could delay rate cuts by adding inflationary pressure. “It’ll take a while for the Fed to make sure tariffs don’t feed into second and third round inflation,” he notes. He pays special attention to real interest rates - the difference between...

The Uninsurable Future: How Climate-Driven Insurance Risk is Reshaping Real Estate The Canary in the CRE Coal Mine If insurance is the canary in the coal mine for climate risk, then the bird has stopped singing. That’s the warning from Dave Jones, former California Insurance Commissioner and current Director of the Climate Risk Initiative at UC Berkeley. In a conversation that touches on reinsurance markets, mortgage delinquencies, lender behavior, and regulatory dysfunction, Jones laid out the most sobering climate-related CRE risk analysis to date: we are already living through a systemic insurance crisis—and commercial real estate is not exempt. “We are marching steadily towards an uninsurable areas in this country,” Jones warns. From Homeowners to High-Rises: What the Data Shows Much of the early distress has been observed in the residential and small business markets, where data is more publicly available. A study by the Dallas Fed, cited by Jones, found a direct correlation between areas hardest hit by climate events and surging insurance premiums, non-renewals, and mortgage delinquencies. But commercial real estate isn’t insulated. While pricing data is less transparent due to looser filing requirements, Jones states, “everything that I’ve seen indicates that those [commercial] rates are going up too,” particularly in regions where catastrophic climate events are becoming more frequent and severe. Take Florida. One of our clients’ office tower's premiums jumped from $300,000 to $1.2 million in a single renewal cycle. That’s straight off the bottom line. The hit is entirely non-accretive; it’s pure cost. The Feedback Loop: Insurance, Lending, and Liquidity As insurance availability shrinks and prices soar, lending dries up. Lenders want to see that there is property and casualty insurance yet, as it becomes harder to get, that has implications in credit markets… and flow-through implications to the real economy. It’s not just anecdotal. Jones references studies showing that banks are offloading loans insured by lower-rated, higher-risk insurers to Fannie Mae and Freddie Mac, effectively shifting the risk onto taxpayers. That means if a hurricane hits and the house is knocked down, there isn’t insurance available, potentially because the insurance company went insolvent. The trend is clear: insurance stress is bleeding into credit markets and weakening the foundations of the entire real estate financing stack. The “Deregulation” Illusion Some states, like Florida, are trying to respond by loosening regulatory constraints to attract insurers. Jones is skeptical. “Florida rates are four times the national average,” he says. The state has adopted taxpayer-funded reinsurance schemes, weakened litigation protections, and allowed less-robust rating agencies to operate. Still, “the national branded home insurers are not writing in Florida… they can’t make a profit,” says Jones. “So even with all these changes, the background risk is too great.” In short: deregulation cannot solve a fundamentally unprofitable underwriting environment driven by climate volatility. Adaptation Isn’t Being Priced In - Yet Jones is more optimistic about resilience measures. Home hardening, defensible space, and forest management, especially in wildfire-prone states like California, can materially reduce losses. Commercial insurers often have engineering staff to assess and recommend these strategies. But the industry hasn’t kept pace. “Insurers, by and large, are not accounting for property, community, and landscape-scale adaptation and resilience in their models,” Jones says. One exception is Colorado, which passed a law requiring insurers to factor in proven risk mitigation. This could prove to be a model for commercial markets, but it’s early and insurers remain price takers in the face of mounting losses. From Reinsurance to Municipal Bonds: Signals to Watch What market signals should CRE investors...

Supply, Stalemate, and Strategy: A Data-Centric View on U.S. Housing with Chris Nebenzahl Locked-In America: The Housing Market’s Great Stall The U.S. housing market isn’t just tight, it’s inert. As Chris Nebenzahl, Housing Economist at John Burns Research and Consulting, puts it, America is experiencing a “lock-in effect” where millions of homeowners, beneficiaries of sub-3% mortgages from a prior era, have no incentive to move. Transactions, both in the for-sale and rental segments, are stalling. Inventory is constrained by economic rationality, not lack of demand. “The housing market thrives on constant moves,” Nebenzahl says. “But right now, across the housing spectrum, people are locked in.” The result: record-low turnover in single-family and multifamily rentals, with occupancy propped up by immobility rather than expansion. In such a frozen ecosystem, prices remain surprisingly buoyant despite high rates – a divergence from textbook supply-demand dynamics. The 5.5% Mortgage Threshold: A Reopening Trigger? The most actionable insight from Nebenzahl’s research: housing won’t truly unfreeze until mortgage rates return to a “magic number” of approximately 5.5%. That’s the psychological and financial line at which the lock-in effect starts to meaningfully ease, based on historical demand models and borrower behavior. With mortgage rates stuck between 6.5% and 7.5%, this still feels a long way off. Until that number is achieved, or until housing prices decline significantly, mobility will remain stifled. Notably, certain regions such as Florida, Texas, Arizona, and Tennessee are already seeing modest price declines, indicating that some pressure is starting to break through. But Nebenzahl is clear: this isn’t a repeat of 2008. “Nationwide, I think we’ll see maybe a 1–2% decline in home values. We’re nowhere near GFC territory,” he says. The real estate crash of yesteryear was a systemic event; today’s stalling is more friction than fissure. Bifurcation in Geography and Performance The story of U.S. housing is increasingly one of regional divergence. “It’s a tale of two markets,” Nebenzahl observes. Northeast, Midwest, parts of the West Coast: Supply remains tight, pricing is stable or even rising, and rent growth is positive particularly in cities like Boston, Chicago, and San Francisco. Sunbelt metros like Austin, Dallas, Denver, Nashville: Facing ongoing rent declines and incentives as a wave of multifamily supply catches up with (and briefly outpaces) demand. What’s driving this? In one word: inventory. “Austin, for example, has seen the most supply as a percentage of existing stock. That’s softened rents, even though demand remains strong.” The Quiet Strength of Rentals Despite oversupply in some markets, multifamily is holding up. Rents have stabilized, absorption remains healthy, and rent-to-income ratios are generally favorable. Nationwide, that ratio sits around 25%, well below the 30% threshold for ‘rent burden.’ Even in supply-saturated markets like Austin, ratios hover near 20%, laying a foundation for recovery. Why this resilience? A few reasons: Affordability gap: With for-sale housing out of reach for many due to both price and interest rates, renting becomes the only viable option. Mobility hedge: In uncertain economic times, the flexibility of a 12-month lease is more appealing than a 30-year mortgage. Demographic tailwinds: New household formation, though potentially threatened by labor market softness, is still skewing towards rentals. “The lion’s share of household formation is going into rental,” Nebenzahl says. “Because of affordability challenges, and because people are hesitant to make long-term commitments.” Cracks in the Foundation: Where Distress May Surface Still, there are stress points, especially in assets underwritten in the froth of 2021. “I’d be watching older vintage assets in oversupplied markets,” he says. “Many of those were acquired with floating...

Navigating Risk, Noise, and Uncertainty: Barry Ritholtz on Investing in a Volatile World In my conversation with Barry Ritholtz, chairman of Ritholtz Wealth Management and host of Bloomberg’s “Masters in Business” podcast, we explored market and real estate cycles, caution, and capital allocation in today’s increasingly unpredictable economic environment. Below are the most actionable and provocative takeaways for real estate investors, both passive and professional, drawn from Barry’s decades of lessons and market observations. Origins of Insight: From Blog to Bloomberg Ritholtz didn’t set out to run a multi-billion-dollar firm. What started as daily trading notes eventually evolved into a blog, a book, Bailout Nation, and a platform that positioned him to correctly call both the top and bottom of the 2008 financial crisis. This journey, grounded in curiosity and behavioral finance, shaped the contrarian and data-driven approach he still employs today. "I just wanted to know why some people made money while others didn’t doing the same thing." The 2008 Playbook: Behavioral Edge Over Economic Models Ritholtz attributes his early warning of the Global Financial Crisis (GFC) to non-traditional thinking and real estate roots (his mother was a real estate agent). Observing abnormal refinancing activity and "cash-out mania" led him to investigate securitized debt and derivative risk, well before it was mainstream. He reverse-engineered risk from Reinhart & Rogoff’s crisis research and famously predicted the Dow’s decline to ~6,800—earning mockery initially, then vindication. Echoes of 2008? Why This Time Feels Precarious While he stops short of predicting a crisis, Ritholtz allows for a 10–15% probability of a self-inflicted depression – a worst-case scenario rooted not in structural weakness, but political mismanagement. “It [is an] asymmetrical risk to take one bullet, put it in a six shooter, spin the wheel, and put it up against your head with a $28 trillion economy.” From tariffs to immigration policy to fiscal gamesmanship, Ritholtz sees signs that the U.S. may be eroding the long-standing trust that underpins reserve currency status and global capital flows. Cash Isn’t a Plan, Discipline Is When asked whether it makes sense to sit in cash and wait out the next downturn, Ritholtz counters with behavioral caution. Historically, those who “go to cash” rarely reenter at the right time and often miss the rebound entirely. “If you're going to sit out in cash, do you have the temperament, the discipline to get back in?” Instead, he recommends building resilience: modest leverage, long-term focus, and capital efficiency – hallmarks of legends like Sam Zell, who Ritholtz holds up as a model of disciplined real estate investing. A Word on Leverage: Use with Extreme Care High leverage is the common thread in stories of ruin. Ritholtz referenced the downfall of the Peloton CEO, who borrowed heavily against inflated stock. The same caution applies to over-leveraged real estate investors, especially those who haven’t endured a full cycle. “Market crashes are where capital returns to its rightful owners.” For CRE sponsors, now is the time to refinance where possible, preserve cash, and maintain flexibility, even if that means lower IRR projections. How to Filter the Noise: Create an Information Diet Ritholtz emphasized the need to tune out “financial candy from strangers” – the firehose of social media, Substacks, and hot takes by unvetted commentators. “They don’t know your zip code, your goals, your tax bracket. Why would you trust them?” He recommends identifying a shortlist of credible voices with defined, rational processes and a record of sound judgment. “Build your A-Team,” he advises. “Then ignore the rest.” Real Estate Today: Not Monolithic, but Multifaceted Unlike equities, real estate behaves very differently depending on location, asset class, and capital structure....

The Looming Crisis Few Want to Confront Paul Daneshrad, CEO of StarPoint Properties and author of Money and Morons, is sounding the alarm: the United States is barreling toward a sovereign debt reckoning – and real estate professionals are not nearly prepared. Citing economists Reinhart and Rogoff, along with voices as diverse as Jamie Dimon, Jerome Powell, and Ray Dalio, Daneshrad warns that the U.S. has not only crossed the 100% debt-to-GDP threshold, widely viewed as a critical danger zone, but has kept accelerating. "We're at 120 to 140% on-balance-sheet," he notes. "If you include off-balance-sheet liabilities, we're at 300%." While the exact timing of the crisis is unknowable, Daneshrad argues that its inevitability is not. “It’s not a question of if – it’s when.” Politics, Populism, and Normalcy Bias Daneshrad is quick to dismiss the conventional partisan narrative. The deficit is no longer a left-right issue, it’s a bipartisan affliction. Both political parties, he argues, are fueling structural imbalances. Worse, the electorate, while voicing concern, refuses to vote for hard choices. This disconnect is the heart of his book’s provocative title: Money and Morons. “86% of Americans say they’re worried about the debt,” he says. “But they won’t vote for politicians willing to solve it, because that solution involves pain.” The result is what psychologists call “normalcy bias” – an instinct to ignore looming threats and retreat into the comfort of the familiar. Fixed-Rate Fortresses: Real Estate’s First Line of Defense If the debt crisis triggers hyperinflation and a spike in interest rates, as Daneshrad expects, the implications for real estate will be seismic. His response? Radical preparation. StarPoint has already begun shifting its portfolio into 20+ year fixed-rate debt and is moving toward 30-year structures. “It’s painful. It’s more expensive. But if the crisis comes in eight years, and you’ve got two years left on a 10-year loan, you’re vulnerable.” He emphasizes that this is not a fringe view. “Even Powell, whose mandate doesn’t include the deficit, felt compelled to warn the public. That’s how serious it is.” Deleveraging with Purpose Debt levels at StarPoint are also coming down – fast. The firm is targeting 40% leverage, down from a peak of 70%. They currently sit at 54%, and the journey continues. The rationale is clear: when interest rates jump from 6% to 15%, the re-pricing of real estate will be brutal. “That’s trillions in lost value,” says Daneshrad. “You have to de-risk now.” The Forgotten Asset: Cash Cash, often derided for its lack of yield in boom times, plays a central role in Daneshrad’s playbook. “The Rockefellers, Kennedys, Guggenheims – they had cash when it mattered. They bought at two cents on the dollar.” Berkshire Hathaway’s record cash holdings reinforce this strategy. “Buffett sees limited opportunity right now and high risk. That should tell you something.” Daneshrad recommends targeting cash reserves as a percentage of either AUM or annual free cash flow, steadily building them over time. "Public companies get punished for it. Private firms like ours have more flexibility and we’re using it." Why He’s Not Buying (Yet) Despite market dislocation, Daneshrad says StarPoint is mostly sitting on the sidelines. Cap rate spreads don’t justify the risk, and few deals offer the deep value he’s targeting. “We’re looking for rebound plays where sellers are on their third buyer and need certainty of close. That’s where the discounts are. But those opportunities are rare.” Asked whether the mispricing stems from short-term underwriting or optimism bias, he shrugs. “We’ve flooded the system with liquidity. Asset prices are artificially propped up.” Diversification and the Limits of Real Estate Daneshrad is not betting the farm on U.S. real estate. He’s pursuing modest geographic diversification abroad and expanding into non-real estate asset...

The Real Estate Cycle: A Warning for 2026 Insights from Phil Anderson on the Coming Real Estate Market Crash In my conversation with renowned economist Phil Anderson, you will gain unprecedented insight into the mechanics of real estate cycles and why we are right on the precipice of the next major real estate market crash. Anderson, author of "The Secret Life of Real Estate and Banking," presents a compelling case that combines economic theory with historical precedent to paint a picture of where we stand today – and where we’re headed tomorrow. The Foundation: Understanding Economic Rent The Law That Economics Forgot To understand the thesis, here’s a powerful analogy: just as we accept the law of gravity dictates that a dropped pencil will fall to the ground, there exists an equally immutable economic law that has been largely forgotten. Anderson calls this the "law of economic rent" and it’s the principle that all of society's gains and benefits will ultimately gravitate toward land prices. This fundamental concept explains why we experience predictable real estate cycles. When society allows land earnings to capitalize into prices (typically representing 20 years of earnings), and banks are permitted to extend credit based on those inflated prices, a real estate cycle crash becomes inevitable. It's not a possibility – it's a mathematical certainty. The Erasure of Land from Economics Anderson reveals a crucial historical shift that occurred after World War I. Prior to 1907, economists universally recognized three factors of production: labor, capital, and land. However, as land reform movements gained momentum and threatened established interests, there was a deliberate effort to remove land from economic textbooks entirely. Today's economists learn only about labor and capital, treating land as merely another form of capital. This fundamental misunderstanding, Anderson argues, is why virtually no mainstream economists saw the 2008 financial crisis coming, nor will they recognize the signs of the coming downturn. The Cycle Mechanics: Why 18-20 Years? Historical Reliability The 18-20 year real estate cycle has been remarkably consistent throughout American history, documented back to 1800. Anderson traces this pattern through every major economic downturn: the 1920s, early 1970s, 1991, and 2008. In each case, the proximate cause wasn't what most economists claimed – it was the deflation of land prices. The current cycle began in 2012, marking the bottom of the last downturn. We are now in year 13 of the cycle, approaching the critical 14-year mark that historically signals the beginning of the end. Here’s how it works: The Anatomy of a Cycle Anderson explains that real estate cycles run like this: The cycle is 18.6 years on average - "14 years up and 4 years down" 2012 was the bottom - Land prices peaked in 2006-2007, then had approximately 4 years down to the 2012 bottom 2026 is the projected peak - As Anderson states: "14 years up from there [2012] takes you to 2026. It really is that simple." We're currently in year 13 - From 2012 bottom + 13 years = 2025, approaching the 14-year peak in 2026 Years 13-14 are the "Winner's Curse" - The final speculative phase when "animal spirits are truly unleashed." Current Position in the Cycle This precise timing explains why Anderson identifies us as being in "the last couple of years of the cycle." All the current signals he observes - housing stocks rolling over, banking deregulation beginning, frenzied speculation in Bitcoin and cryptocurrency - point to our approach toward the 2026 peak rather than suggesting we've already arrived there. The critical insight is that we're in the dangerous final speculation phase right now. We're experiencing what Anderson calls the "Winner's Curse" period of years 13-14, when speculation reaches fever pitch and "animal spirits are truly unleashed." The peak is expected in 2026, which would then...

The Margin of Error Has Vanished: What CRE Investors Should Be Watching Now Commentary on a conversation with John Chang, Senior Vice President and National Director, Research and Advisory Services, Marcus & Millichap The New CRE Investment Mandate: Survive First, Then Thrive “The margin of error has narrowed to virtually zero.” This was John Chang’s stark assessment of today’s commercial real estate environment – an era marked by fragile capital markets, rising Treasury yields, policy instability, and speculative hangovers from a decade of cheap money. According to Chang, the headline playbook hasn’t changed: keep leverage low, maintain reserves, underwrite for downside. But the stakes have changed. What used to be prudent is now required. Those who forget that, particularly those lulled by the long post-GFC bull run, risk extinction. Cap Rates, Treasury Yields, and the Compressed Spread A central theme of our conversation is the vanishing spread between borrowing costs and asset yields. Cap rates have risen 100–200 bps depending on asset class and geography, but Treasury rates have risen more. That’s compressed spreads, rendering most acquisitions reliant on a value-creation story or an eventual rate reversal. Investors are still transacting, says Chang, but only if they believe they can bridge the spread gap through operational improvements i.e. leasing, renovation, management upgrades. Passive cap-rate arbitrage is no longer viable. “The potential for something to go wrong is high,” Chang warns, especially in a policy environment that remains erratic. The Treasury Market’s Imminent Supply Shock Chang outlines why he expects upward pressure on Treasury yields for the balance of the year – contrary to the market's general expectations of rate cuts. Key reasons: Federal Deficits: With a delayed budget, Treasury issuance has been running below historical norms. That’s about to reverse, with $1–1.5 trillion in supply expected by October. Shrinking Buyer Base: The Fed is reducing its balance sheet. Foreign holders, especially China and Japan, are net sellers. Even traditional allies are showing less appetite, driven partly by frictions over U.S. trade policy. Trade Tensions: Tariffs of up to 145% on imports from China, EU saber-rattling, and a broad retreat from globalization are alienating the very buyers of U.S. debt. “People don’t want to do us any favors right now,” Chang says. “That uncertainty alone elevates risk premiums.” Normalcy Bias and the Myth of the Perpetual Up Cycle Chang pulls no punches on the market psychology underpinning risky underwriting in recent years. He describes a bifurcated investor landscape: Those who entered post-GFC and think 2–3% interest rates and infinite rent growth are normal. Veterans of the 1990s S&L crisis, the dot-com bust, or the GFC, who know better. What’s striking is the lack of long-term data. Even Marcus & Millichap, he notes, only has robust CRE data going back to 2000. Without context, many have mistaken the tailwind-fueled 2010s as a standard baseline. “We’re back to old-world real estate,” Chang says. “Where you have to actually understand the property, the tenant mix, the microeconomics of location. The era of pure financial engineering is over.” Lessons from the Pandemic and GFC: Underwrite for Downside, Not for Hype Chang recounts closing on an investment in April 2020 at the very onset of pandemic uncertainty. “What if we rent at breakeven?” he asked. If the answer was yes, he proceeded. That conservative approach worked then and still applies today. The biggest blow-ups, he says, came from sponsors who: Modeled double-digit rent growth. Over-leveraged. Used floating-rate debt without hedges. Ignored capex and reserves. By contrast, Chang praises sponsors who locked in fixed debt, kept leverage under 65%, and stayed humble. “They’re embarrassed to be earning 7% IRRs,” he jokes, “but in this climate, that’s a win.” Washout in...

Leyla Kunimoto brings a rare and unfiltered perspective to today’s commercial real estate conversation: that of a full-time individual LP who writes publicly about her investment decisions. She’s not a sponsor, a capital raiser, or a fund manager; she’s an investor allocating her own capital and speaking candidly about what she sees in the market. Through her newsletter Accredited Investor Insights, Leyla connects with hundreds of other LPs and GPs, giving her a uniquely well-informed view of how sentiment is shifting, how sponsors are adapting (or not), and why many individual investors, herself included, are taking a more cautious, capital-preserving stance in the current environment. Track Records Are the New Credentials Leyla made one thing immediately clear in my conversation with her: experience across market cycles matters more than ever. Sponsors who lived through the Global Financial Crisis (GFC), and made it out intact, view the world differently. “There’s a certain level of conservatism they develop,” she said, that translates into more disciplined underwriting, more thoughtful pacing, and fewer emotionally driven decisions. This stands in sharp contrast to what Leyla observed in 2020, when billboards at Dallas airports advertised real estate masterminds promising to teach people how to raise capital fast. She watched sponsors pile into deals with razor-thin margins, driven more by optimism than fundamentals. Some of those same players are now facing tough questions from investors. Tariffs Are Already Affecting CRE in Two Big Ways While many LPs focus on interest rates, Leyla highlighted tariffs as a macro driver that’s beginning to affect commercial real estate, particularly in development. First, tariffs are raising costs on imported materials, like lumber, pushing construction budgets higher. Second, she’s watching what tariffs could mean for demand in the industrial sector. “If trade with Mexico declines, what happens to logistics facilities near the border?” she asked. Conversely, if reshoring takes off, we may see demand rise for inland warehouse space. It’s a nuanced picture and one that sponsors in ground-up deals can’t afford to ignore. Equity Is Cautious. Retail Capital Is Now in Play. Another shift Leyla is tracking is on the capital side. Institutional equity has pulled back in many corners of the market, and some sponsors are turning to retail LPs for the first time. But this isn’t an easy pivot. “Retail investors are expensive to reach,” she said. They also tend to ask more questions – and now, they’re more skeptical. Many LPs are sitting on deals that aren’t performing. As a result, the bar for new allocations is much higher. “There’s a sense of caution,” she noted. “LPs aren’t allocating blindly anymore.” Floating Rate Debt Divides the Market Leyla sees a bifurcated sponsor landscape: those who are still dealing with the aftermath of floating-rate debt, and those who have the capital and flexibility to transact but can’t find deals that pencil. Sponsors with legacy floating-rate loans are focused on rate caps and marginal cash flow. They’re rooting for the Fed to cut rates. Others are hunting for acquisitions, but the math isn’t working. “Without aggressive assumptions, most deals don’t pencil,” she said. The IRR Illusion: What LPs Should Actually Be Watching Many sponsors still lead with IRR projections, but Leyla has shifted her mindset. “I don’t screen for how much money I’m going to make. I don’t screen for the IRR probability,” she told me, “the only thing I’m laser beam focused on when I evaluate private placement deals is the probability of losing money.” That loss-aversion lens changes everything. She believes LPs are better off compounding modest, positive returns over time than chasing double-digit IRRs that come with a real chance of loss. “Making 3-4% positive IRR for 10 years straight outperforms hitting 20% on some deals and going to zero on...

How to Survive the Coming Real Estate Storm – What Sean Kelly-Rand Learned at Lehman For the experienced real estate investor or sponsor, this is a masterclass in what really matters. When Lehman Brothers unraveled in 2008, it exposed a truth that many in the real estate world still prefer to ignore: even the most sophisticated capital structures can implode when the cost of capital and access to liquidity are misunderstood – or worse, taken for granted. My podcast/YouTube show guest today, Sean Kelly-Rand, didn’t just watch that collapse unfold; he lived through it from inside and the playbook he uses today as the managing partner of RD Advisors is shaped, in part, by that early, formative experience. His approach offers a deeply pragmatic framework for anyone navigating real estate in today’s uncertain climate. In an era of overpromised alpha and fragile capital stacks, Kelly-Rand's doctrine is a study in restraint, structure, and staying power. From the Heart of Lehman to the Edges of Risk Kelly-Rand joined Lehman Brothers in 2006, just before the implosion, drawn by its dominance in the bond markets which he saw, even then, as the true engine behind real estate. While most looked to equity investment banks for leadership, he understood that the debt markets were where real decisions were made. His work centered on real estate financing and syndication, with a front-row view of a business model that was, in hindsight, structurally doomed. Lehman’s capital stack had been stretched too far – built on short-term funding to support long-term positions. As the firm accumulated assets, expanding its real estate exposure from $5 billion to over $36 billion, it did so with virtually no cushion. Liquidity was cheap and ubiquitous, but inherently unstable. When securitization markets seized up, those long-term assets could not be offloaded without catastrophic discounts to book value. And because any sale would have forced a full repricing of the entire book, no sale could be tolerated. Lehman was stuck – and the system broke. That lesson remains central to Kelly-Rand’s thinking today. The real issue wasn’t the quality of the assets; it was the fragility of the structure behind them. Risk wasn’t in the deal. It was in the funding. Rebuilding from the Ground Up In the years that followed, Kelly-Rand transitioned from the institutional capital markets to operating in the private lending space. He co-founded RD Advisors not just to chase yield, but also to build a firm capable of weathering downside scenarios – starting with a clean-sheet design of its capital strategy. The fund today focuses exclusively on senior secured debt, kept short in duration and conservatively underwritten. The business avoids the artificial stability of interest reserves or payment-in-kind structures that mask actual performance. Instead, it emphasizes cash-paying borrowers and short-term duration to preserve optionality and liquidity. Leverage is kept modest by design, with loan-to-value ratios structured around exit values that tolerate declining markets. Crucially, every deal is evaluated with a focus on capital preservation. Underwriting is done not with optimism, but with contingency: would the fund be comfortable owning the asset if they had to should a borrower walk? If the answer is anything but a clear yes, the deal doesn’t proceed. This mentality isn’t just prudent, it’s essential. The goal is to never rely on someone else’s execution for one’s own capital security. And that institutional memory from the GFC sits the core of the process. Avoiding the Illusion of Alpha Much of what passes for outperformance in today’s real estate environment is simply leverage in disguise. Sponsors show high IRRs, but beneath them is a capital structure dependent on favorable refis or asset appreciation that may no longer be achievable. That’s not skill, it’s exposure. Kelly-Rand’s fund’s returns, by contrast, are...

Navigating Multifamily CRE in a Volatile Environment Insights from Paul Fiorilla, Director of U.S. Research at Yardi Matrix Paul Fiorilla offers a data-driven view of today’s commercial real estate (CRE) landscape using the vast resources he has at his disposal at Yardi. While market sentiment may be growing more optimistic, Fiorilla acknowledges investors should separate short-term mood from long-term fundamentals. His perspective, rooted in close analysis of multifamily data and macro conditions, is both pragmatic and cautionary: yes, there’s capital on the sidelines and deals are getting done but many investors may be misreading the durability of recent tailwinds and underestimating latent risks. Short-Term Confidence, Long-Term Industry Real estate is an inherently long-term, illiquid asset class yet, much of the current market behavior appears to be anchored in short-term confidence (and short term memories). That dissonance should give investors pause. While macroeconomic shocks like tariffs, interest rate hikes, and political uncertainty do not immediately register in quarterly CRE data, their effects compound over time. Investor sentiment, meanwhile, remains buoyant. Debt markets have resumed activity, stock indices are back near prior highs, and many assume the worst is behind us. But the lagging nature of real estate data means we're still months away from fully seeing the impacts of recent fiscal and geopolitical developments. Multifamily Fundamentals: A Shifting Landscape Fiorilla addresses the fundamentals of the multifamily sector, noting that demand has remained strong in recent years, but the distribution of that demand is shifting. Rent growth is no longer universal. Over the past 15 months, metros in the Midwest and Northeast, markets like Chicago and New York, have consistently posted moderate, steady rent growth. In contrast, high-growth Sunbelt cities such as Austin, Atlanta, Nashville, and Salt Lake City are experiencing flat to negative rent trends. What’s driving this bifurcation is primarily supply. In oversupplied markets, absorption hasn’t kept pace with new deliveries. Despite a sharp national decline in starts, down approximately 40% year-over-year, the existing pipeline remains heavy. Nationally, over 1.2 million units are either in lease-up or under construction. In high-growth markets, deliveries will continue at elevated levels for the next several years. Some cities may see 12–15% added to their multifamily inventory by 2027. Fiorilla underscores that while national numbers suggest a tapering of supply, the local realities are more complex. Markets that arguably need more housing, Los Angeles, New York, and Chicago for example, are seeing similar slowdowns in new development as oversaturated markets. The result is a continued misalignment between where capital is building and where it’s most needed. The Waning Tailwinds of Demand Fiorilla also points to softening demand drivers that may soon undermine current assumptions. Over the past several years, demand has been supported by several powerful tailwinds: robust job growth, high immigration, and pandemic-era trends such as household formation and suburban relocation. But these are now tapering. Net immigration, while still meaningful, is slowing. Job growth has begun to decelerate. Moreover, federal employment cuts and delays in private-sector hiring – driven by political and fiscal uncertainty – are contributing to a weakening outlook for household formation. These are not necessarily signs of imminent distress, but they do suggest that the extraordinary absorption rates of 2021–2022 will be difficult to sustain. As Fiorilla puts it, “the risks are to the downside.” He’s not forecasting a collapse but cautions against overreliance on recent performance when underwriting future deals, particularly in light of ongoing supply pressure. Policy Risk and the Fragility of Subsidized Housing Among the...