Tag Archives: CREFinancing

Distress or Opportunity? Securing Capital for Value-Add and Distressed Asset Strategies

by: Adam Horowitz

The commercial real estate market in 2025 is shaped by volatility, price dislocation, and tighter credit conditions. With over $1.8 trillion in CRE loans maturing by 2026, asset owners across property types are facing capital stack pressure, valuation resets, and increased scrutiny from lenders. For seasoned sponsors, this environment presents a rare opening to acquire underperforming or distressed assets at attractive pricing, assuming capital is secured with precision.

The challenge is clear. Traditional lenders are retrenching, underwriting standards are more conservative, and execution timelines are compressed. Those who can bring capital certainty to the table will have a clear advantage in unlocking value from assets others are forced to exit.

Understanding the Current Landscape

Distress is growing across key asset classes. Many Class B and C office buildings, older multifamily properties, and retail centers are facing diminished cash flows and declining valuations. Rising interest rates and expiring fixed-rate debt have created a liquidity gap, especially for sponsors with limited access to alternative capital.

At the same time, market fundamentals in many locations remain strong, particularly in sectors like industrial, data centers, and workforce housing. This divergence has led to selective but active interest from non-bank capital sources who are willing to engage when the structure, plan, and sponsorship are sound.

However, capital is not flowing freely. Securing financing for transitional or distressed assets today requires a tailored approach, disciplined underwriting, and alignment between sponsor and capital provider.

Best Practices to Attract Capital in 2025

If you are actively pursuing value-add or distressed opportunities, capital partners are evaluating more than just the asset. Focus on these core principles:

  • Sharpen your underwriting. Reflect current leasing assumptions, capex costs, and exit cap rates. Use sensitivity analysis to demonstrate risk awareness.
  • Be transparent about risk. Sponsors that proactively identify challenges and articulate mitigation strategies build greater trust with capital sources.
  • Show alignment. Demonstrating meaningful sponsor equity and hands-on involvement sends a strong signal to both debt and equity providers.

Act with urgency, not haste. Having a vetted capital network in place shortens timelines and strengthens offers in competitive or distressed bidding environments. 


Capital for Value-Add and Distressed Strategies

Capital for value-add and distressed strategies typically includes several components. These may involve acquisition financing for properties with repositioning potential—such as lease-up, renovations, or rebranding. It can also include rescue capital or preferred equity to recapitalize assets facing maturity defaults or operational shortfalls. Additionally, bridge or mezzanine debt is often used to fill gaps in the capital stack during the value creation process.

In all cases, sponsors must present a credible path to upside, usually through improved NOI, market repositioning, or cap rate compression. Lenders and investors look for well-supported pro formas, conservative exit assumptions, and sponsors with a proven track record of execution.

How Lever Capital Partners Adds Value

Lever Capital Partners provides a competitive advantage by sourcing and structuring tailored financing solutions across the capital stack, including senior loans, mezzanine debt, preferred equity, and JV equity. With strong relationships across non-bank lenders, private credit funds, and institutional investors, Lever combines market insight with real-time access to capital. Beyond placement, the firm offers hands-on support throughout the deal process, from packaging to closing, ensuring alignment between complex strategies and capital execution.

Distressed assets are not without risk, but for prepared sponsors, they offer meaningful upside. In 2025, access to capital will define who can take advantage of this market cycle. With the right strategy and the right advisor, today’s market uncertainty can become tomorrow’s competitive advantage.

The Keys to Unlocking CRE Loan Opportunities in the 2nd half of 2024 and beyond

by: Ashton Zakariaie

The commercial real estate (CRE) lending landscape is undergoing significant shifts, influenced by rising economic uncertainties and heightened caution among lenders. As we move into the second half of 2024, obtaining a CRE loan will remain a challenge, and only the most qualified sponsors will be able to secure financing.

The difficulty in securing CRE loans will persist through the end of 2024 and into 2025 due to increased lender caution and economic uncertainty. The stringent requirements set by lenders will significantly impact the acquisition, development, and refinancing of CRE projects, as fewer will meet the qualifications for funding. Developers will find it harder to start new projects, expand existing ones, or refinance current loans. However, there are strategic ways to navigate these economic constraints and meet the new, stricter requirements being implemented by lenders across the board.

New Requirements for CRE Loans

  1. Stronger Guarantors: Lenders now prefer sponsors who can provide robust guarantees. This additional security assures lenders of the repayment capabilities, thus reducing their risk.
  2. Experienced Sponsors: Sponsors with a proven track record and substantial experience in managing CRE projects are favored. Their experience suggests they are less likely to encounter insurmountable problems and are better equipped to handle and resolve issues if they arise.
  3. Better Financial Economics: The financial requirements for CRE loans have become more stringent. Higher debt service coverage ratios (DSCR) and lower loan-to-value (LTV) ratios are now the norm. This means sponsors must demonstrate stronger cash flow capabilities and provide more equity upfront, further ensuring lenders of the project’s viability and that interests are aligned. 

Impacts on Owners and Developers

The tightening of lending criteria has several critical implications for owners and developers:

  1. Stronger Sponsors for Construction Loans: Only the most financially robust and experienced sponsors will secure construction loans. This limits the pool of potential developers and may slow the pace of new construction projects and therefore the delivery of new product for the next few years.
  2. Reduced Construction and Acquisition Loans: Compared to previous years, the volume of construction and acquisition loans will likely remain low. This is a direct consequence of the stricter lending standards and the economic environment that is stymieing overall transaction volume.
  3. Challenges in Refinancing: As property values drop and loan terms become more stringent, refinancing existing loans will remain increasingly difficult. Falling property values reduce the equity available for refinance, and the stricter loan terms make it harder to qualify for new loans. Sponsors may find themselves unable to refinance with favorable terms, which could lead to financial strain and potentially forced sales.

Strategies to Secure Loans in 2024-2025

Given the challenging lending environment, sponsors can adopt several strategies to improve their chances of securing a CRE loan:

  1. Credit Enhancement: Enhancing the credit profile of the guarantor can make a significant difference. This might involve improving financial statements or finding additional guarantors to bolster the overall financial backing of the loan.
  2. Raising Additional Equity: With lower LTV/LTC ratios, sponsors will need to raise more equity to fill the financing gap. This additional equity reduces the lender’s risk and makes the project more attractive for financing.
  3. Higher Leverage, Higher Cost Debt: In some cases, taking on higher leverage, higher cost debt may be necessary to bridge financing gaps. While this increases the cost of capital, it can make it possible to move forward with projects that might otherwise be stalled due to equity shortfalls.
  4. Leveraging Relationships: A large network and strong relationships with lenders can help sponsors find more favorable loan terms. Sponsors should leverage their connections and work closely with financial advisors to identify the best financing options that are tailored to their project and overall business plan.
  5. Strategic Credit Enhancements: Finding credit enhancements that address both capital needs and credibility can be a game-changer. This might involve securing mezzanine financing, preferred equity, or other forms of credit support that can improve the overall financing package.

The CRE lending landscape in the second half of 2024 is characterized by heightened caution and stringent requirements. Only the most qualified and experienced sponsors with robust financial backing will succeed in securing loans. By understanding the new requirements and strategically enhancing their financial positions, sponsors can navigate this challenging environment and continue to pursue CRE opportunities. Lever Capital Partners’s knowledge and experience in times like these, matched with a well-connected network of capital providers with significant dry powder will be an invaluable asset for sponsors looking to secure the most favorable loan terms in this new era of CRE financing.