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After several muted years, capital is cautiously re-engaging in commercial real estate, with multifamily debt liquidity notably stronger than a year ago. Kristen Croxton, principal at Arcus Harbor Real Estate Capital, reports that borrowers now see more financing options, particularly from debt funds, even as macroeconomic and geopolitical uncertainty keeps lenders selective.
Agency lenders remain an important backbone for the sector. Fannie Mae and Freddie Mac are still active in the multifamily space, while life insurance companies continue to provide capital and CMBS is a viable option, especially for older-vintage or Class C properties. Despite this breadth of providers, capital is being allocated with tighter parameters around market exposure and asset vintage, making underwriting more discriminating than in prior cycles.
The current capital stack challenge is less about finding debt and more about securing equity. Over the past six to 12 months, equity capital has often been the hardest piece to assemble, pushing sponsors to approach capitalization more strategically. This is particularly relevant for transactions that need additional preferred or common equity to close gaps created by valuation shifts or refinancing shortfalls.
From a geographic perspective, multifamily generally remains financeable across most of the country, but select markets are showing stress from new deliveries. Austin, Nashville, Charlotte, Phoenix and Denver are cited as areas where recent supply has triggered lender caution and closer scrutiny. The prevailing view, however, is that this oversupply is likely to be temporary, with expectations that conditions will normalize over the next 12 to 18 months as units are absorbed.
Capital markets are also responding to the push for more attainable and workforce housing. Fannie Mae and Freddie Mac continue to emphasize this segment, and additional capital is forming around it as various groups launch dedicated workforce housing funds. On the debt side, there is strong appetite for these assets, suggesting real follow-through beyond policy discussions.
Upcoming debt maturities are another key focus. Croxton notes that extensions are still achievable, but increasingly require some level of loan paydown, except in cases where relationship banks are willing to be more flexible. Even then, extensions now tend to come with more structure and borrower contributions than in the past. Where refinancing proceeds fall short of existing balances and new equity cannot be raised, owners may need to sell or negotiate a discounted payoff, which could support an increase in both refinancing activity and dispositions.
Overall, the multifamily capital markets environment remains fluid, with conditions shifting in response to broader economic and geopolitical developments. Agency processes are taking longer, which extends timelines and raises execution risk for borrowers who wait too long to engage lenders. Croxton stresses the importance of involving the capital markets team early so financing can be prepared in advance and locked when a favorable window appears, reducing the risk of slipping into maturity default.
The post Multifamily Capital Markets Q&A: Arcus Harbor’s Kristen Croxton on Debt, Equity and Distress appeared first on CRE Market Beat.
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