CF CAPITAL | ELEVATING COMMUNITIES TOGETHER
Hello Friends and Investors,
Welcome to the second issue of The Signal. June has been a month where the prevailing narrative got harder to hold. For most of this year, the consensus was that rates would ease and transaction activity would follow. That story is now being challenged in real time. Here's what's changed and how we're thinking about it.
Thank you for reading and for holding us to a high standard. That standard is what makes this work.
The Rate Cut That Isn't Coming
When we wrote to you last month, the 10-year Treasury sat around 4.30% and the working assumption across most of the industry was that the Fed's next move would be down. Six weeks later, the market has changed its mind.
As of early June, the 10-year is trading around 4.5%, and futures markets have shifted from pricing in rate cuts to pricing in the possibility of a rate hike before year-end. The Fed held its benchmark rate steady at 3.50% to 3.75% at its most recent meeting, and stronger-than-expected data - including a May jobs report that came in at 172,000 against forecasts closer to 85,000 - has reinforced the view that the easing cycle many sponsors were counting on may not arrive this year.
The single most important assumption in a lot of 2026 business plans - that rate relief is coming - is no longer a safe one to make.
Why the Shift
Three forces are pushing the same direction. Inflation has stayed sticky near 3% against the Fed's 2% target, with elevated energy prices tied to the Middle East conflict adding pressure. The labor market has stayed resilient, removing the urgency to cut. And the Fed's leadership has changed: Kevin Warsh has been confirmed as Chair, and markets read him as hawkish.
That last point matters most to us. Warsh has been a vocal advocate for meaningfully reducing the Fed's balance sheet - and when the Fed sells long-dated bonds, yields rise and borrowing gets more expensive at the long end of the curve, which is exactly where multifamily debt is priced. The market's response to his confirmation has been to push the 10-year higher, not lower.
What It Means for Multifamily
We've said before that the 10-year matters more to our cost of capital than the Fed's overnight rate, and this is the month that distinction becomes concrete. A 10-year drifting toward 4.5% and higher - rather than easing toward 4% - keeps borrowing costs elevated, keeps the bid-ask spread wide, and extends the timeline on the transaction recovery many expected in the back half of this year.
This isn't a reason for alarm. It's a reason for realism. The sponsors most exposed are the ones who underwrote on the assumption of imminent rate relief - refinancing into lower rates, exiting into compressed cap rates. The sponsors who underwrote to today's cost of capital, with no reliance on a rate-driven rescue, will be fine regardless of what Warsh does.
We have never underwritten a deal on the hope that rates would save it. That discipline matters more this month than it did last month.
The maturity wall we wrote about last issue doesn't go away in this environment - it gets heavier. Owners waiting for lower rates to refinance now face the prospect that the window they counted on may not open, which increases the likelihood that more assets come to market out of necessity rather than choice. For disciplined, well-capitalized buyers, higher-for-longer is uncomfortable in the near term and opportunity-rich over the next twelve to eighteen months.
We still believe activity picks up. We're simply less certain it happens on the timeline the consensus assumed in the spring - and more convinced that when it does, it rewards the buyers who never needed rates to cooperate in the first place.
Steady Where It Counts
The rate picture is a national story. The view from inside our markets is quieter - and in this environment, quiet is a feature.
Across Louisville, Lexington, Indianapolis, Cincinnati and Columbus, the dynamics we described last month hold. Deal flow is slightly wider than a year ago but still selective on what actually closes, with motivated sellers - those facing a maturity, a partnership issue, or a fund timeline - remaining the primary source of trades. A higher-for-longer environment gives discretionary sellers less reason to come off the sidelines, not more.
What continues to differentiate our footprint is what it doesn't have: the speculative overbuilding that defined the Sun Belt last cycle. Our markets weren't priced on the assumption of explosive rent growth, so they aren't being repriced on its absence. Stability that looked unexciting in 2021 looks like a real advantage in 2026. We're staying close to our broker relationships, underwriting consistently, and positioning for what a higher-for-longer environment will surface in the second half of the year.
On Coming in Second
A bit of candor this month. We recently came in second on a deal we wanted - for the second time in a short stretch.
On the most recent one, we weren't outbid. The competing buyer had transacted with this seller before, and that prior relationship gave the seller a certainty about closing that we, as a first-time counterparty, couldn't manufacture in the moment. On the one before that, we were outbid - and we're at peace with how we approached it. We ran it up to our line, held our discipline, and let it go when the math stopped making sense.
We're sharing this because we'd rather give you the real picture than a highlight reel. It's hard to keep doing disciplined work and not be transacting. But the things that win deals in a market like this - seller trust, a track record with a specific counterparty, certainty of execution - are built over years, not summoned in a single bid. We're building them. And we'd rather lose a deal we'd have had to overpay or over-promise to win than carry that decision for the next five years.
We control our discipline, our process, and our relationships. The rest, we let go. That's the job in this market.
In the spirit of candor: this was a heads-down month. The headline activity inside the firm has been refinancing work and operations - the unglamorous, foundational work that determines whether a platform holds up when conditions are hard.
We're actively managing refinancing processes with ample lead time and strengthening our operating platform. Some months the firm update is a milestone. This month, it's the grind - done well, done consistently, with the long term in view. We think that's worth saying plainly.
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"The big money is not in the buying and the selling, but in the waiting."
— Charlie Munger
As always, if something here resonated or you'd like to talk, we'd welcome the conversation.
In Partnership,
Tyler & Bryan
