September’s headlines were dominated by:
Interest rates, debt stress, and portfolio collapse
SEC rule changes
AI-driven market changes
Market bright spots
1: Interest Rates, Debt Stress, and Portfolio Collapse
The Fed raised rates, effectively negating any hope of relief for the thousands of underwater loans across all asset types. As “survive till ‘25” moves well past its expiration date, entire portfolios of multifamily syndicators are collapsing. Now that 2026 is wrapping up and owners’ debt stress appears poised to convert to buyers’ market opportunity, capital is queuing up to take advantage.
2: SEC Rule Changes
The SEC is actively moving toward “democratization” now rebranded as “responsible retailization” of private investments. The proposals include new ways to qualify as an accredited investor, expanded fee disclosure and permission for managers to collect performance fees on unrealized gains.
The SEC argues access to private investments permits a broader array of investment opportunities – especially since an increasing number of companies are staying private longer. And maybe private investment managers want in on the huge (and growing) retail investor market?
3: AI-Driven Market Changes
The impacts of AI growth and investment go far beyond the stock market:
Data centers are growing rapidly, but face increasing challenges.
SF is again the most expensive metro in America as AI wealth pours into the housing market.
AI is changing underwriting and analysis, how buildings are monitored and operated, and could cut construction costs by up to 20%.
As warehouses are converted to data centers, industrial shows strong growth.
4: Market Bright Spots
CRE is passing through some tough times, but it’s not all doom and gloom:
Consumer spending and retail centers are growing.
Supply is poised to become scarce: construction starts are at low points, and ongoing and expected increases in construction costs add additional challenges.
Rental rates are increasing as a whole, but the gains are not evenly distributed across markets.
The Skeptic’s Corner
Real estate and particularly syndicated real estate is currently out of fashion. And for good reason: the aspirational business plans of 2022 have destroyed millions of dollars of savings from accredited and non-accredited investors alike. Skim investor review platforms, and the grossly flawed assumptions of inexperienced and jubilant LPs and GPs make it look like real estate is the fast track to destroying, not building, wealth.
Real estate is a proven wealth-building machine, but private syndicated real estate is not.
As fundraising remains persistently difficult, GPs are employing new tactics. Some are responding to investor skepticism by providing greater transparency and proof points to build trust. Others are employing novel but morally questionable tactics to tap the newest cohort of accredited investors. And in the meantime, the SEC wants everyone to have expanded access to private investments.
The struggle between good and not-so-good continues…
Quote of the Month
“Shall we repeal the laws of economics?”
— Howard Marks, Oaktree Capital Management
What did we miss?
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