What Makes a Deal Investable (and Why Most Aren’t)

Leverage is the most direct expression of risk tolerance in real estate investing. Every lender sets limits. Every sponsor chooses a capital structure. The question is not whether to use leverage—it is how much leverage can be sustained through volatility without triggering a forced sale.

A deal financed at 75% LTV with floating-rate debt and a two-year maturity is not a leveraged investment. It is a refinancing gamble disguised as real estate. The asset may perform. The operations may execute. But if debt markets tighten at maturity, the sponsor is left negotiating extensions at punitive rates or selling into weakness.

We focus on leverage not as a way to amplify returns, but as a test of durability. Conservative LTV (typically 60–65%) paired with fixed-rate, long-term debt eliminates the binary outcome of a refinancing event. This is not about avoiding risk—it is about avoiding risks that do not pay us to take them.

The maturity wall is not just a macro trend—it is the primary structural risk we evaluate. A deal that leans on a two-year bridge or a floating-rate bullet is exposed to refinancing volatility. Markets that were liquid in 2021 are more selective today, and lenders are demanding stronger coverage.

We require underwriting that extends beyond the first debt reset. Our scenarios explicitly model the refinancing outcome: rate, coverage, proceeds, and timing. If the deal fails in this scenario, it fails in the market.

Covering conservative DSCRs with realistic cash flow and validating liquidity sources is more important than chasing the densest money-on-money multiple.

• Run bridge-case, stabilization-case, and stress-case refinancing scenarios
• Require equity to survive the stress-case without further fundraising
• Avoid floating-rate structures that reprice before stabilized NOI is proven

The best story in the market is worthless if the property cannot execute. We dig into the sponsor’s operating plan, the team’s track record, and the alignment of incentives.

Execution is not just “doing the physical work.” It is about communicating with lenders, navigating permitting, and keeping reserves intact. Misalignment here often forces equity to inject unplanned capital or take a loss.

We partner with operators who have lived through multiple cycles and have clear escalation paths for challenges. That alignment protects time and capital.