Nine months into 2025, one thing is clear: capital markets are growing more selective. In mid-September, the Federal Reserve cut its target rate by 25 basis points to 4.00%–4.25% and signaled the potential for more reductions. For investors, this isn’t just a headline — it’s a signal that discipline and structure matter more than ever.

At CF Capital, we believe structure is protection — especially for equity investors. As volatility increases, we’re doubling down on a capital stack strategy designed to reduce risk, preserve flexibility, and enhance resilience. Here’s how we’re positioning ourselves — and our investor partners — to lead in this changing landscape.

1. Conservative Leverage Anchors Resilience

When rate moves are unpredictable, even small changes can impact performance. That’s why we continue to emphasize disciplined leverage:

• Modest loan-to-value ratios and strong debt-service coverage
• Deals stress-tested for +200 bps rate shocks, vacancy declines, and inflation
• Ample capital reserves to avoid pressure during refinancing windows

For investors: Conservative leverage gives your capital more room to weather turbulence and avoid forced decisions.

2. Purposeful Use of Preferred & Mezzanine Capital

In today’s high-rate environment, some sponsors lean heavily on complex structures. We’re selective and strategic instead:

• Preferred or mezzanine tranches are used only when they strengthen—not complicate—the capital plan
• These layers are limited in size and structured with equity protections
• They support alignment rather than dilute it

For investors: Our use of structured capital supports upside potential without compromising protection.

3. Matching Capital to the Business Plan

A common misstep in this cycle is pairing long-term holds with short-term capital. We focus on alignment:

• Value-add or shorter-hold assets get flexible, short-duration financing
• Stabilized, income-oriented assets are paired with long-term or hedged debt
• This reduces rollover risk and helps preserve optionality

For investors: Better alignment lowers the chance of refinancing at the wrong time — and helps protect returns.

4. Acting Early, Not Reacting Late

The Fed’s recent move is a reminder: hesitation can be costly in volatile markets. We’re always tracking shifts and positioning ahead of the curve:

• We monitor lender behavior, spreads, and capital flows closely
• We pursue refinancing opportunities early, before pressure builds
• Our strong relationships across the capital stack keep options open

For investors: Being proactive means we protect capital before market stress — not after.

5. Radical Transparency with Investors

Even the best capital stack is only valuable if you understand how it protects your investment. We’re committed to clear, consistent communication:

• Each deal includes a capital stack summary and modeled downside scenarios
• We explain structural decisions — from reserves to pacing — with clarity
• As market inputs shift, we update assumptions and keep you informed

For investors: Transparency gives you confidence in how we’re protecting and growing your capital.

What the Numbers Show

The Fed’s cut reflects rising uncertainty — softer labor trends and sticky inflation. Our recent activity already accounts for this:

• New underwriting includes 10–15% operating buffers and rate sensitivity
• A recent deal used preferred equity to fund capital needs without diluting equity upside
• In refinancing discussions, we’re prioritizing lenders offering flexibility and embedded rate caps

Why This Matters for CF Partners

Many sponsors will be forced to react as conditions tighten. At CF Capital, we’re already operating from a playbook built for resilience.

We believe that success in 2025 won’t come from doing more deals — it will come from doing smarter, better-structured deals. Our approach is designed to protect equity, preserve flexibility, and deliver in any market cycle.

If you’d like to review our capital stack strategy, downside sensitivities, or how we’re approaching deal structure in this environment, we’d be glad to share more.