Real Talk on Real Estate
September 10, 2025
Turning Real Estate Stress Into Opportunity: Why Preferred Equity Leads the Way
Cracks in the Foundation
Commercial real estate is cycling through stress across nearly every sector. Office vacancies remain stubbornly high, multifamily projects are bumping against refinancing cliffs, and industrial and retail valuations have cooled from pandemic peaks. Interest rates remain elevated, and banks are lending at the slowest pace in more than a decade, further tightening liquidity.
Beneath it all lies a maturity wave: close to a trillion dollars in loans need refinancing in 2025, with another surge extending into 2026 and 2027. Debt written in an era of near-zero rates must now reset in a costlier world, forcing sponsors into capital shortfalls and reshaping the market’s demand for financing.
Mind the Gap
This is where “gap capital” steps in. Often structured as preferred equity, it bridges the divide between shrinking borrower equity and tighter senior lending. For sponsors, it provides a lifeline to refinance and stabilize projects.
For investors, it offers income anchored by contractual protections, seniority in the capital stack, and selective upside participation as markets recover.
Here are a few questions to consider as you evaluate private real estate opportunities:
- Are you prepared for the 2025–27 refinancing wave?
- Are you aligning with managers who can deploy capital across cycles?
- How are you structuring downside protections in a tighter lending environment?
