Why short-term rescue capital can provide a ray of sunshine and deal opportunities for commercial brokers
A recent slide in mortgage rates has provided at least a temporary burst of positive energy into what has been a wait-and-see market in 2025. It might be the break in the forecast that commercial real estate (CRE) mortgage brokers have been awaiting.
Jeff Brown (pictured top), founder and CEO of T2 Capital Management, said forecasting the outlook on the CRE market has been a little more glass-half-empty lately.
“I saw a great headline recently, and it was pervasive for the commercial real estate industry as a whole, but I think it really applies to multifamily space, and that is cloudy with a chance of sunshine,” Brown told Mortgage Professional America. “We're all used to seeing the forecast of sun with a chance of clouds. This is just the inverse right now.”
The ongoing elevated mortgage rates, combined with volatility caused by macroeconomic factors like tariffs, have left many commercial mortgage underwriters with their hands full.
“There are a lot of people just kind of feeling their way around right now,” Brown said. “There's a bit of a macro resetting of pricing. This notion of higher for longer has stayed for a lot longer than a lot of people anticipated, particularly in light of the new administration in Washington. And so there's, again, just this new re-acclimation of, where is the market today?”
A commercial lifeline
While rates have fallen to their lowest point in 2025, most economists believe that a major further drop is unlikely. However, these smaller declines are injecting some optimism as the market heads into the fall.
“What can I underwrite to if I'm a prospective buyer?” Brown said. “What can I reasonably underwrite my exit cap rate to be in five years, seven years, or 10 years? That visibility has been lacking for an extended period of time. I think there is a chance of sunshine at this point. Interest rates are not going to do this precipitous fall that many of us in commercial real estate had hoped for in 2025.
“At least I have some visibility, and hopefully some conviction about what cap rates I can underwrite to, what rent growth I can underwrite to, and then make educated, fully informed bids on properties. And then it's up to sellers to accept that.”
Selma Hepp, chief economist at Cotality, shares insights on how Fed decisions, a cooling economy, and affordability concerns could shape mortgage rates and housing trends for the rest of 2025.
— Mortgage Professional America Magazine (@MPAMagazineUS) August 11, 2025
Read the full outlook on what’s next for borrowing costs.https://t.co/UFMyErDR6L
One area where T2 Capital Management has been making headway is through short-term rescue capital. Brown notes that while they have to be very careful about where they invest, there are some good opportunities available on the market.
“We love those situations,” he said. “I think we start with it by saying, obviously, we're a for-profit organization. We want to be very intelligent with our capital deployments and make money. But we truly want to be helpful. I understand the situation where these multifamily buyers and developers, who did the development in 2020-2022 with expectations that cap rates would be much lower by now, interest rates would be much lower by now, and they would be able to exit very profitably.
“They are finding themselves in this brand new world in which many of them are upside down, and many of them have lenders that are impatient. It gets ugly really quickly. We come at it to say, not only do we want to generate a profit for T2, but we really want to be helpful.”
Case-by-case basis
This type of lending can provide opportunities for commercial mortgage brokers to help past customers who expected much different market conditions than they are now and are hopeful to keep their property.
“How can we craft a capital structure in which you, Mr. Developer, can retain ownership of your property and still hold on to the upside you hope for, but we need to resolve this problem,” Brown said. “Be it the lender that is mandated to pay off the capital partner that is saying, ‘We've run our course. We need to exit from this sort of investment.’ We've had a really good run recently in the multifamily space.”
While companies like T2 would like to help as many of these situations as possible, they have to do due diligence to make sure the rescue capital makes sense. Brown said one recent situation came in the student housing space.
“We looked at a rescue capital situation eight weeks ago down south,” he said. “It was a student housing property that was built just three or four years ago. The lender wants out, but the property is in really rough shape. Students haven't really adapted to it. It hasn't taken off as expected. That presents an incredibly challenging situation for rescue capital.
“In some cases, it’s just going to have to work itself out, where maybe the lender does take the property back, or maybe they just sell it. The bank doesn't want the property on their books, so they sell it at a low price. We try to help avoid those situations, but they are inevitable in some cases.”
For brokers, lenders, and investors, the goal is to utilize rescue capital when it makes sense to help customers out of a difficult situation without liquidating the property. If everything lines up, Brown said everyone can come out ahead in the end.
“It really does start with, how do we form a partnership with the borrower that's in trouble,” he said. “So that you end up with a win-win scenario at the end of the day.”
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
