CF CAPITAL | ELEVATING COMMUNITIES TOGETHER
Hello Friends and Investors,
Nearly every investor can recite the line about being greedy when others are fearful. Far fewer act on it when the moment actually arrives, because the moment never looks like an opportunity. It looks like rising rates, falling values and headlines about distress. That is exactly where multifamily sits this fall.
This issue makes a simple and unfashionable argument: for patient, well-capitalized investors, this is a compelling time to buy apartments. Not because the risks are gone, but because they are finally being priced.
The current market backdrop is challenging, and there’s no reason to pretend otherwise. On September 16, the Federal Reserve raised the federal funds rate by a quarter point to a range of 3.75% to 4.00%, its first increase since 2023, and the median projection now points to one more hike before year-end. The 10-year Treasury closed at roughly 5.28% on October 6. Buyers who signed contracts when debt was cheaper are now retrading deals, and the share of CMBS loans in special servicing reached 11.42% in August, the highest level since February 2013.
Multifamily has taken more of the damage than most. Apartment values were 22.3% below their July 2022 peak as of July, a steeper correction than office, retail or industrial, according to MSCI Real Capital Analytics data cited in Arbor Realty Trust's fall 2026 report. Values fell nearly 5% over the past year alone, while overall CRE prices held flat.
Look underneath the price, though, and the picture changes:
Repriced assets, a shrinking pipeline, firming rents and missing buyers: that combination is what an attractive entry basis looks like. The investors who say they want to be contrarian are, by and large, sitting this one out. That is the opening.
In the spirit of candor, we are not calling a bottom. The spread between multifamily cap rates and the 10-year Treasury was about 118 basis points in Q2, versus a roughly 290-basis-point average since 2010. That thin cushion means pricing could soften further if long-term rates stay where they are, and it is why we underwrite to today's debt costs rather than hoping for relief. But on a five-to-ten-year hold, the entry basis does much of the work. Buying well below peak values, ahead of a supply shortfall, with a reasonable chance of smoother conditions at exit, is a setup we would rather lean into than watch from the sidelines. There are no guarantees. The market rarely pays for consensus.
Most of the distress conversation has centered on the Sun Belt, and for good reason. Those markets absorbed the heaviest supply wave and the most aggressive 2020-2022 borrowing. But we expect the next round of distress to reach our footprint as well, and we think that is where some of the most compelling opportunities of this cycle will come from.
The data supports that view. Trepp's 2026 analysis of Midwest Multifamily found that while Midwest loans carry lower watchlist and special servicing rates than the Sun Belt, the gap effectively disappears at serious delinquency: 2.8% in the Midwest versus 2.9% in the Sun Belt. The Sun Belt does face roughly 2.5 times as many CMBS multifamily maturities through 2029, so the volume of opportunities here will be smaller. In our view, that makes local knowledge and relationships matter more, not less.
From our seat across Louisville, Lexington, Indianapolis, Cincinnati and Columbus, the situations we expect to see are less about broken buildings and more about broken capital stacks: owners who bought near peak pricing on short-term debt, now facing maturities at today's rates. The groups positioned to act will be the ones with lender and broker relationships already in place, operating capability on the ground, and equity that is ready before the opportunity shows up. That is the work we are doing now.
In late September, Tyler had the honor of joining Louisville Business First's 2026 Forty Under 40 class at the awards celebration. It was a night of gratitude - for a city that invests in its own people, for our team at CF Capital, and for the partners and investors who make this work possible every day. Congratulations again to all of this year's honorees.
We will not dress it up: this is a demanding market to operate in, and right now the work is more grind than ribbon-cutting. We see real opportunities taking shape, and we are being selective about which ones we pursue. We also believe long-term equity has not yet fully recognized this moment, and we are having those conversations directly.
Across the portfolio, the focus is execution. We made meaningful occupancy gains in Q3, and our priority for Q4 is holding those gains and continuing to drive NOI growth. We are also working through a complicated refinance - the kind of work that rarely makes headlines but matters a great deal to the investors behind it. We will keep you updated as it progresses.
Rate Surge Fuels Retrades as CRE Buyers Demand Price Cuts
Rising rates are pushing CRE buyers to renegotiate signed deals, as CMBS special servicing hits 11.42%, the highest since 2013.
Multifamily Fundamentals Improve as Apartment Values Lag
Multifamily fundamentals are strengthening as supply recedes and rents broaden, but high Treasury yields keep apartment values 22.3% below their 2022 peak.
Mastering the Market Cycle
by Howard Marks
The legendary investor Howard Marks shows how to identify and master the cycles that govern the markets.
"The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell."
— Sir John Templeton
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
