One developer stresses the important role of mortgage brokers in the commercial real estate market
While some sectors of the commercial real estate (CRE) market remain strong, even with elevated rates, other sectors haven’t been as fortunate.
Many properties in some of those troubled sectors are expected to come on the market as lenders look to move on from projects that haven’t panned out. One mortgage expert believes that this can provide a great opportunity for CRE mortgage brokers.
Rick Porras (pictured top), CFO of Neology Development Group, said now is the time for brokers, lenders, and investors to be ready to jump on those distressed properties, if the deal is right.
“There are developers or projects that are not operating successfully, that are in distress now because they haven't been able to meet their loan payments,” Porras told Mortgage Professional America. “They haven't been able to keep up with the market. We have lenders that reach out to us. ‘We have this project. The operator may not make it; this property may become available. Are you guys interested?’ So the opportunities are there.”
Taking more risks upfront
While some in the commercial space are waiting for what they hope will be a rate decline later in 2025, Porras cautions that those who wait may find themselves struggling to get the deal they want.
“You need to jump on early, when the opportunities are out there,” he said. “Once the market shifts and everybody gets in, now you're in the mix with everybody else. At that point, it's harder to find deals, and the prices start going up, and then you're behind the eight ball. You're not going to make the returns that you want to make.
“You have to take a little bit more of a risk now, thinking that the market is going to eventually recover and stabilize. You just need to get ahead of the game. You can't wait.”
Porras said it is also vital for mortgage brokers, lenders, and investors to keep an eye out for properties that may be coming on the market.
“It’s extremely critical,” Porras said. “When you're in a loan, your financial covenants increase, and your debt yield goes up every year. Your debt service coverage ratio goes up every year. If you're not operating efficiently, you can't meet it. Now your property goes into a cash trap, where they pretty much take all the cash available, and give you a little bit for operating, and then that's just the death knell for the property. It’s very hard to get out of that.”
When properties reach the cash trap stage, it becomes difficult to find a solution for the property. In many cases, these properties must be put up for sale.
“You've got to go out to market,” he said. “You can't refinance because your property is not performing, so the lender is going to come in and maybe give you less money than what your loan is worth. You may have to put more money into the property, and you've got to make a capital call, and that's not going to be good. Capital calls for financing are not going to be looked upon very well.”
The role of CRE brokers
In a challenging market, Porras believes that mortgage brokers play a critical role in getting deals done.
“They provide a very, very important role, because they obviously have a vast network, not only of equity partners, if that's the direction you go, but of lenders,” Porras said. “So it’s important to develop a good relationship with a broker.”
That relationship is critical, and building those relationships is one thing he encourages CRE brokers to do to drive more business.
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— Mortgage Professional America Magazine (@MPAMagazineUS) August 21, 2025
“I think one of the things that the brokers need to focus on is getting in touch with a developer,” he said. “Feel comfortable with the developer, feel comfortable with the sponsor, and then they know, ‘Okay, this sponsor will fit the profile for these four or five loans.’ At least that's been our experience.”
“We seem to get the same lenders interested just because they're comfortable with us, and the broker knows us. The brokers play a very key role, and they handle stuff behind the scenes with the lender. They may be more comfortable asking a question to the broker than directly to us. So they're a very important liaison between the developer and the lender.”
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