CF CAPITAL | ELEVATING COMMUNITIES TOGETHER
Hello Friends and Investors,
The country woke up Wednesday to a different Washington. Democrats won control of both the House and the Senate in Tuesday's midterm elections, and by mid-morning the bond market had already offered its first read. Most of the commentary this week will focus on what changes in January.
Our focus this month is on a force that does not care who holds the gavel: the loan maturity calendar. For most of the past three years, apartment owners who could afford to wait, did. That option is running out. We believe the deals that trade over the next 12 to 18 months will be driven less by buyers and sellers agreeing on value, and more by lenders deciding they are done waiting.
Start with the election, briefly. Treasuries rallied as results came in, with the 10-year yield easing to roughly 4.93% on Wednesday morning and five-year yields falling as much as nine basis points. The market's early read is that a Congress and White House controlled by different parties will have a harder time expanding deficits, which takes some pressure off long-term rates. We would not lean too hard on one day of trading. The new Congress is not seated until January, and the Fed still sets the short end of the curve. At its October 28 meeting, the Fed held its target range at 3.75% to 4.00%, with two members dissenting in favor of another hike. The election does not change the core math for apartment owners: the debt coming due today is being replaced by debt that costs materially more.
That is where the real story is. Deal volume remains thin. Excluding one large entity-level merger, U.S. multifamily investment volume fell 8.7% year-over-year in the third quarter. But where apartments are trading, a maturing loan is increasingly the reason.
Here is what the data shows:
Why does this matter? A seller facing a maturity prices differently than a seller who can wait. When we spoke with Multifamily Dive after the Fed's October meeting, our point was that seller expectations usually take a few quarters to catch up to the market. Maturities shorten that timeline, because the lender, not the seller, sets the deadline.
A word of candor. Not every maturity becomes a bargain. Many will be resolved quietly through recapitalizations, preferred equity or loan modifications, and preferred equity has become increasingly common where senior loan proceeds cannot cover a refinance gap. The assets that do come to market under pressure often carry deferred maintenance and operating problems that came with the capital stress. The discount has to be real after you account for the work. Our job is to tell the difference.
The maturity wave has reached our footprint. Over the past several weeks, we have started underwriting several opportunities in Louisville and Lexington with a common profile: older-vintage properties financed in 2021 and 2022 with floating-rate bridge debt, now facing maturities they cannot refinance at today's rates and values. The sellers vary. The capital stack problem is the same.
Lender behavior is all over the map, but the dominant pattern has shifted. The patience of the past few years is fading. In most of what we are seeing, lenders are either pushing the borrower to sell or taking the property back and selling it themselves after foreclosure.
Two observations from the seat. First, lender-driven sales run on a different clock. A lender selling a foreclosed asset is focused on recovering capital and moving on, not on holding out for the price it could have gotten in 2022. That creates room for buyers who can close with certainty. Second, much of the institutional capital pursuing distressed multifamily is still focused on the Sun Belt, where the volume is largest. In our experience, that means thinner competition for distressed Midwest assets, and a better chance that relationships and execution, rather than the highest bid, decide who wins.
We are underwriting these opportunities the same way we would any other: the property first, the story second. A forced seller is a reason to look, not a reason to buy.
What Walking Away Costs
In October, we terminated our contract on Main & Clay, a Class A community in Louisville's NuLu neighborhood. We believed in the asset, and we still do. But rates moved meaningfully while we were under contract. The seller came part of the way on price, but not far enough to reflect where the cost of capital had gone. We terminated before our deposit went hard, and it was returned.
That is where most deal stories end. It is not where the costs end. Pursuing an acquisition of that size takes months of underwriting, legal work, third-party reports, lender conversations and investor outreach. Those costs are real, they are paid up front, and when a deal dies, the sponsor absorbs them. Investors rarely see this side of the business, because the deals that die never reach them.
We share it because it is the honest version of the word "discipline." Discipline is not free, and it is not abstract. It is a decision to absorb a known cost today to avoid a larger and less visible one later: overpaying for an asset in a rising-rate environment and asking our investors to carry that basis for the next five to ten years. We would make the same call again.
To the investors who soft-reserved for Main & Clay: thank you for your confidence and your patience. We will bring that same discipline to the next opportunity.
Portfolio operations. Physical occupancy across the portfolio has risen roughly three points since early July, from about 88% to nearly 92%. The largest gain came at one of our Louisville communities, up more than ten points over that period. Two other communities now sit above 95% leased, and demand at one of them was strong enough that we implemented a rent increase across the property in October. Not every asset is moving in the same direction. Two communities have softened this fall, and the focus heading into winter is unit turns, collections and resident retention. We are also rolling out new income programs, including bulk internet and parking, across several properties.
Fast 50. Louisville Business First named CF Capital No. 9 on its 2026 Fast 50 list of the fastest-growing companies in Louisville, measured by revenue growth from 2023 to 2025. That growth reflects years of incremental work by our team and the trust of the investors and partners who have backed us. Read the feature here.
Looking ahead. Multifamily remains our core. We have also started early work on adjacent strategies and geographies where the same disciplined underwriting applies, with an eye toward where the best risk-adjusted entry points of the next cycle may be. More to come as that work takes shape.
Despite Pausing Rate Hikes, 'Inflation Is Too High': Fed Chair
Multifamily Dive on the Fed's October hold, featuring Tyler on why seller expectations take a few quarters to catch up to the market.
Distressed Sales Jump 26%, Led By Multifamily Deals
Bisnow's look at MSCI data shows apartments leading the rise in distressed sales this year, and how small that share of the market still is.
Quit
by Annie Duke
Duke makes the case that quitting at the right time is one of the hardest and most valuable decisions in business. Walking away from Main & Clay made that point real for us this fall.
"It isn't the changes that do you in, it's the transitions."
- William Bridges
Most of the long-term capital partnerships we've built started with a single conversation - often before there was any deal on the table, and often years before any check was written. The relationships compound. The deals follow. If something in this letter resonated, or if now feels like the right time to start a conversation, we'd welcome it.
Schedule a call with Tyler: Lets Talk!
In Partnership,
Tyler & Bryan
