Commercial real estate finance may be a busier realm in late 2025 than it was a year ago, yet challenges remain for both borrowers and certain classes of lenders. At Oak Brook, IL-based Inland Mortgage Capital, LLC, president Art Rendak sees a changed lending landscape compared to the pre-pandemic years. In the Q&A below, he maps out the current landscape.
Q: Has Inland Mortgage been seeing increased demand for bridge loans thus far in 2025 compared to a year ago? What is driving this?
A: Inland Mortgage Capital, LLC (IMC) has experienced a significant increase in loan submittals, driven by our reliable loan quotes and the fact that fewer alternative lenders offer non-recourse commercial real estate financing in the $5-million to $20-million range.
Since the pandemic, especially after the Federal Reserve’s interest rate increases, many lenders have struggled with floating-rate loans in their portfolios, as they were underwritten at unsustainable debt yields. With a 30-day Term SOFR now around 4.35%, up from 0.05% in July 2021, lenders are facing workouts, extensions, or requiring sponsor equity injections to adjust the size of these loans.
Many lenders in the $5- to $20-million space, as well as small and mid-sized banks, are now prioritizing portfolio management over new originations due to these challenges.
While more lenders are redeploying capital as legacy loans are resolved, the pool of small-balance lenders remains notably smaller than it was before the pandemic.
Q: The company provides bridge loans across product types. Are you seeing any product types and situations becoming more prevalent among borrowers?
A: We are seeing a good deal of flow for multifamily, industrial, and retail property types as we have been soliciting those asset classes the most aggressively. We are principally focused on acquisitions, as they are easier to underwrite than the refinancing opportunities due to the debt yield challenges discussed above. We recently closed a gut rehab hotel that was compelling due to the loan cost and strength of sponsorship, even though the submarket is thought of as “overbuilt.” We also closed a purpose-built student housing to a conventional multifamily conversion based on the same characteristics. The challenge there was the unit mix consisting of all two- and three-bedroom apartments.
We still see our competitors being cautious in retail, but we are much more bullish on anchored and unanchored retail. However, we are less bullish on power centers (particularly with co-tenancy) and are not looking at malls at all.
As mentioned, we are seeing a lot of deal flow for the refinancing value-add multifamily loans and self-storage loans coming out of construction or at the beginning of lease-up. In the case of multifamily refinancing requests, these were generally underwritten in the low-interest rate era, and generally, these transactions are approaching maturity and require substantive equity to meet underwriting. In the case of the self-storage refinancing, we are seeing some oversupply issues resulting in concerns over absorption and rental achievement, but we like the product.
Q: Bridge financing is one of the few loan types offered through debt funds. What are some of the reasons a borrower would select one over the other?
A: Non-recourse, non-recourse, non-recourse. Borrowers look to debt funds particularly for this feature, as it differentiates the debt fund from a bank. Sponsors that are syndicating or putting up less than most of the capital may not want to guarantee the loan since they are only receiving a portion of the upside.
We think our vetting process in the initial screening and our higher level of likelihood of closing the loan under the terms initially provided give us an edge when the deal terms are comparable with our competitors’.
Borrowers typically choose bridge financing because it offers a level of flexibility not always available elsewhere. The underwriting of a business plan for transitional assets may differ broadly, as each deal can be seen from the “eyes of the beholder.” These loans can be tailored to meet the specific needs of a property or business plan, such as renovations or repositioning required before securing permanent financing.
Q: What is the current fundraising environment for debt funds — are investors more or less receptive about participating compared to 2024 or 2023?
A: Investors’ interest in CRE, particularly debt funds, in 2025 is notably higher than it has been in recent years. In 2023, market volatility and rate hikes deterred many. Confidence began to return in 2024, and now there is strong interest, particularly in real estate credit, such as bridge financing.
Attractive yields and defensiveness make debt funds appealing. Investors get real estate exposure with less risk than direct equity.
Still, investors are selective, seeking disciplined underwriting, transparency and a proven track record before committing capital. These factors reinforce the importance of prudent deal selection.
Looking ahead: Debt funds are positioned to provide flexible, timely capital without the challenges facing regulated banks. Inland Mortgage Capital remains committed to speed, certainty, and tailored solutions for sponsors, while creating attractive investor opportunities relative to our capital.
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