By Brennen Degner
In our industry, the paradox endures: it is hardest to close deals precisely when you should be buying. When capital is in short supply and values have reset, the path to the finish line grows longer even as the basis you are buying improves. We have grown to really enjoy this part of the cycle; building creative structures, engineering operational turnarounds, and tackling heavy construction that unlocks real value. However, this is also when the market slows to a crawl. People move quickly when the goal is maximizing gains; they move slowly when the task is containing losses, even though speed is often the best way to limit those losses.
The practical reason is complexity. When assets are changing hands slightly above, or materially below, the loan balance, there are simply too many decision-makers and not enough alignment. Lenders, servicers, special servicers, LPs, and sponsors all sit around the same table with different mandates and clocks. The result is deal paralysis: extensions, incremental “status updates,” and valuation debates that keep everyone busy while deferring the only real decision that matters, price and plan.
And then there is the human component that data rarely captures. Stakeholders managing a loss in capital tend to move through the five stages of grief before they transact. Expectations set during the last expansion die slowly; underwriting premised on peak rents and low debt costs does not easily reconcile with today’s NOI and capex needs. That takes time, especially when business plans require admitting that value is created by fixing the operations and the assets, not by waiting for the next wave of trend growth.
Against that backdrop, we think our markets are setting up for a generational buying window. We target assets in large, durable metros that are experiencing near-term softness, navigating liquidity constraints, and came off a period of exceptionally high transaction velocity at the peak. That tends to create temporary mispricing’s where the pendulum swings too far relative to long-run relationships. This creates opportunities to buy well, fix what matters, and let steady operations do the compounding.
Our approach for this phase is straight-forward: we prioritize basis and execution on today’s fundamentals over optimism. We lean into structures solving for time and capex without overcomplicating the capital stack and we lead with an operating plan starting on day one: collections discipline, make-ready cadence, work-order burn-down, and a resident first operations methodology. If history is a guide, the market will not flip from slow to fast overnight. It will grind toward clearing as options are exhausted and stakeholders accept where we are in the cycle. Our base case is for a tangible pickup in 2026 as more assets become “must-solve” situations and the process friction that defined the last two years gives way to pragmatic resolutions. When that happens, the buyers who have stayed disciplined on price, clear on plan, and patient with process will be best positioned to put capital to work, precisely when it’s hardest, and when it matters most.