[Podcast] What the Debt Markets Are Telling Us - and Why Sponsors Should Listen
Insights from Lisa Pendergast, CEO, Commercial Real Estate Finance Council (CREFC)
Introduction
Making sense of this market - and offering useful guidance to clients and to you - has become a full-time job.
Rates are stuck, capital is cautious, and policy signals seem to shift by the week. So I turned to someone who has a front-row seat to the institutional side of the debt markets, where the real cost of capital is decided.
Today's podcast guest, Lisa Pendergast, is the CEO of the Commercial Real Estate Finance Council (CREFC), which represents the institutions that provide, manage, and invest in commercial real estate debt - including banks, insurance companies, CMBS issuers, and structured credit investors.
While real estate sponsors, operators, and individual investors are focused on raising equity, managing properties, or investing alongside sponsors, Lisa’s vantage point is different. She speaks from the institutional capital markets side of the industry, where the focus is on managing credit risk, ensuring liquidity, navigating regulation, and understanding the broader flow of debt capital.
Her insights reflect the perspective of those who underwrite, trade, and invest in commercial real estate loans and securities, not the ones raising equity or sourcing deals, but the ones making the debt markets function.
For example, Lisa discusses conduit and SASB loans, which refer to how commercial real estate debt is packaged and sold to investors. Conduit loans are pooled together from many smaller properties and borrowers, offering diversification. SASB loans (Single-Asset, Single-Borrower) are large, customized loans backed by one major property or portfolio.
In Lisa's world, “investors” are the institutional buyers of these securities - like banks, insurance firms, and asset managers - who assess and price real estate risk across portfolios.
Why does this matter to sponsors?
Because investor appetite for these bond structures directly affects how much capital is available and what it costs. When demand softens, lenders tighten credit, meaning they get more selective, raise underwriting standards, pull back from certain markets, or lower the amount they’re willing to lend. That means sponsors may need to bring more equity to the table or face higher interest rates.
In short: Lisa’s insights help explain the capital market forces upstream that shape the terms and availability of financing downstream - where deals get made.
In today’s capital markets, where debt is more expensive, less available, and slower to move, understanding how credit flows work has become just as important as understanding your deal.
Lisa is a central figure in the $5 trillion CRE debt markets. My conversation with her reveals what the institutional investors upstream are seeing, and what that means for those of us operating on the front lines of equity, operations, and acquisitions.
A Market in Holding Pattern
Lisa noted that while Q4 2024 sentiment among debt market participants had turned unexpectedly upbeat, that optimism collapsed in Q1 2025. The cause? Policy uncertainty, rate volatility, and a reemergence of geopolitical and trade risks, most notably the return of tariffs under the Trump administration.
The result is hesitation. From the largest bond desks to the average sponsor refinancing a stabilized deal, participants are stuck in wait-and-see mode. "When there's uncertainty," Lisa explained, "things just stop."
The Math Has Changed
Lisa pointed to a roughly 300-400 basis point gap between legacy loan coupons and current market rates. Even where property fundamentals are stable, that rate delta is making refinancings difficult, especially when higher cap rates have also eroded asset valuations. The implication: more equity must be written into every deal, or the loan won’t pencil.
This is the backdrop to rising CMBS delinquencies, particularly in office and, increasingly, multifamily markets where excess supply and rent softening have converged. Lenders aren’t panicking, but they are requiring more diligence, more equity, and more confidence in borrowers.
Why Sponsors Should Watch the CMBS Market
For sponsors who don't interact directly with capital markets, Lisa offered a critical point: trends in CMBS spreads and issuance are leading indicators. When investors demand higher spreads (i.e., more compensation for risk), lenders raise rates, reduce proceeds, or pull back altogether.
She explained the distinction between conduit deals (pools of smaller loans) and SASB structures (large, single-sponsor or single-asset bonds). The conduit market, a lifeline for mid-sized deals, has slowed dramatically. That signals tightening liquidity for smaller sponsors or niche asset classes. Meanwhile, large SASB deals continue but only with strong assets, strong borrowers, and deep-pocketed equity partners.
The Regulatory Horizon
Lisa also addressed deregulation under Trump 2.0. While she hasn't seen core rules like Dodd-Frank or the Volcker Rule reversed outright, she’s watching how new leadership at key agencies may soften enforcement.
Dodd-Frank was enacted after the 2008 financial crisis to rein in excessive risk-taking by lenders and increase transparency in financial markets. The Volcker Rule, a key provision, restricts banks from making speculative bets with their own capital, especially in risky vehicles like real estate-backed securities.
For sponsors, the concern isn't just about policy in Washington, it’s about what happens to lending standards and capital stability when those policies shift. Lisa’s concern is practical: regulatory whiplash, rules swinging left, then right, then back again, as we’ve seen with tariffs, undermines confidence and can freeze the flow of capital.
When lenders aren’t sure what rules they’ll be operating under next quarter, they hesitate and that caution trickles down to your loan terms. Sponsors should pay attention here. When policy becomes unpredictable, capital becomes cautious and that shows up in the terms you’re offered, or whether your deal gets financed at all.
Final Takeaway: The Debt Market Has Grown Up
Lisa struck a cautiously optimistic tone. Compared to the run-up to the 2008 crash, today’s market is more disciplined. Underwriting remains sound, even in a difficult environment. But that doesn’t mean lenders will stretch.
If you’re a sponsor today, her message is clear: capital is out there but it’s selective, it’s expensive, and it’s scrutinizing every deal.
Lisa's insights offer a rare window into how institutional debt investors are thinking right now and why that matters to anyone trying to get a deal financed.
If you're a sponsor, understanding these upstream dynamics isn't optional - it's essential.
Listen in or watch on YouTube to learn what’s driving today’s capital markets and how to navigate them.
Thanks,
Adam
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