by Neville Rhone Jr. and Quincy Allen
Since 2022, commercial real estate transaction volume has fallen by more than 50 percent from its prior peak. Sponsors that acquired and developed properties during the near-zero interest rate era are now facing loan maturities at valuations below their original basis. Many cannot refinance the full balance at prevailing rates and face a narrow set of options: A cash-in refinancing, a sale that recognizes a material loss, or foreclosure.
Structured equity investors have stepped in to address that gap. This form of capital allows sponsors to retain ownership and avoid locking in losses through GP-led recapitalizations at the asset level (distinct from GP-led secondaries). It also can give senior lenders the ability to restructure a loan on their books while maintaining relationships with borrowers.
The math behind the gap
The scale of the problem is significant. The Federal Reserve raised its benchmark interest rate 11 times in less than two year
