The past two years have reshaped the real estate market in ways that few operators anticipated. Interest rates rose quickly, insurance costs increased across nearly every region, and cash flows tightened for many owners. These conditions forced every investment manager to decide whether to keep following the old playbook or adjust to the environment as it stands today. We chose to adjust. Our current strategy places a strong emphasis on debt offerings through our debt fund and our promissory note offerings. At the same time, we continue to evaluate multifamily opportunities that align with today’s risk and pricing realities. This shift is not a withdrawal from multifamily. It is a disciplined move toward the part of the capital stack that offers stronger and more predictable returns in the present market.
Debt Now Offers More Attractive Risk-Adjusted Returns
Debt has become the more attractive place to invest capital for several clear reasons.
Higher Yields With Lower Risk
During past years, equity drew most of the attention because leverage amplified returns. The landscape is different now. Senior debt yields have increased to levels that often match or surpass the returns that equity used to deliver. Unlike equity, these returns come with stronger collateral coverage and more predictable income. Debt investments today provide consistent cash flow, conservative loan to value structures, and far less exposure to rising operating expenses. When the safer position in the capital stack produces competitive returns, it becomes the rational choice.
Asset Prices Still Have Not Fully Reset
Although some price adjustments have taken place, many sellers remain anchored to valuations from 2021. Meanwhile, borrowing costs have continued to rise. This gap between seller expectations and current financing conditions means many multifamily assets do not yet offer the margin of safety that disciplined underwriting requires. Debt allows us to remain active without taking on the valuation risk that still exists across many markets. The terms of a loan are defined at the beginning, not dependent on optimistic projections about rent growth. In a period where operating expenses can shift quickly, that stability has real value.
Staying Active While Reducing Exposure
By focusing on debt, we stay connected to the market. We review deals, examine financials, and monitor performance across multiple regions. This keeps us informed and engaged without committing capital to acquisitions that do not yet reflect current pricing realities. It also positions us to move quickly when the right multifamily opportunity finally appears.
What This Means for Passive Investors
The appeal of debt is not theoretical. It produces a different experience for investors, one that emphasizes stability, clarity, and protection of principal.
Stability When Equity Is Volatile
Across the industry, many multifamily assets have encountered challenges. Rent growth has slowed in several markets, while insurance and payroll costs have climbed. These pressures affect equity returns because equity is tied directly to operational performance. Debt behaves differently. Payments are contractually agreed upon at the start. The loan terms do not depend on whether rents rise next year. This structural stability is valuable in a transitional market.
Clear Timelines and Predictable Cash Flow
Debt investments offer defined cash flow and set maturity timelines. In an environment marked by uncertainty, shorter duration investments with predictable payments can be an advantage for investors seeking steady income.
Downside Protection as Values Move
A lender holds the senior claim on an asset. If valuations decline, equity is affected first, not debt. With conservative underwriting, strong collateral, and careful screening, debt provides meaningful protection for investor capital.
Our Approach to Multifamily Acquisitions
Although debt is our primary focus, we have not stepped away from multifamily. We continue to review opportunities but only pursue them when the numbers reflect the current economic environment. Any acquisition must meet strict criteria. Cap rates must align with today’s borrowing conditions. Cash flow must be strong enough to support operations without aggressive rent assumptions. Projections for expenses such as insurance and payroll must be realistic. Most importantly, the deal must remain viable even in downside scenarios.
Only a small percentage of the opportunities we review meet these standards. This level of discipline protects your capital and ensures that when we do acquire assets, they are priced and structured for long term success.
Preparing for the Next Market Cycle
Real estate cycles always move in phases. The strongest returns of the past several decades came from periods when disciplined investors preserved capital during a correction and then deployed capital into distressed or repriced assets. A significant number of multifamily loans are scheduled to mature over the next two to three years. Many were originated when interest rates were far lower. As these loans come due, some owners will struggle to refinance. This will create opportunities for well positioned buyers and lenders. By emphasizing debt today, we build income stability and maintain flexibility. This ensures we are ready to act when the next wave of opportunity arrives.
Our Commitment
Our guiding principle remains the same. Protect capital first. Grow capital second. Debt offerings achieve this more effectively today than most equity investments. At the same time, we continue evaluating multifamily deals with strict discipline to ensure that any acquisition meets the standards required in this environment.
This approach is not passive. It is strategic preparation. It positions your capital for strength now and opportunity when the market shifts.
