One CEO Sees Buying Window Emerge As Capital Market Clouds Begin Lifting

Commercial real estate’s overall outlook on capital markets may still be gloomy, but one suburban Chicago developer is seeing rays of opportunity breaking through in a corner that has been especially dark: buying or lending on existing assets.

Jeff Brown, founder and CEO of Wheaton, Illinois-based T2 Capital Management, said a complicated macroeconomic environment obscured by tariffs and international unrest that sent many retreating to the sidelines is coming into more focus.

It is settling in that tariffs at some level are here to stay, and expectations are that projects will once again pencil, albeit at higher rates. Those who act now will be ahead of the curve.

“It feels like we’re entering into — and maybe are in the early innings of — a really interesting buying opportunity,” Brown said. “Now there is some clouds lifting, and those that are early in this phase of buying are going to get rewarded.” 

T2 largely focuses its capital strategies on multifamily, student housing and private credit, last year crossing $2B deployed since the company’s inception in 2011. The company has equity stakes in a host of properties throughout the Midwest and South as well as a growing debt portfolio in both regions. 

The company has stepped up its work in the private credit space in the last two to three years to fill the void formed by conventional lenders’ retreat from the market. 

“Banks are in the market, but they're especially conservative, and understandably so in light of all the uncertainty that's out there,” Brown said. “But it does leave a material void to fill for those that have a higher risk tolerance. You get paid for that risk.”

As private credit lenders, T2 provides bridge loans designed for transitional situations, usually at terms of three years. Brown said because the company isn’t making 10-year, long-term bets on assets, it has more visibility into exit strategies and added conviction over how and when it gets paid off. 

That has led T2 to focus on property types with the highest probability of getting paid off in a short period: multifamily, student housing, industrial and retail. The company has built downside protection into its credit offerings, providing loans at 65% of an asset’s value, which offers a cushion for values to fall.

Some of T2’s debt deals are the result of floating-rate debt “coming home to roost,” with the company stepping in as a preferred equity piece to provide it with a guardrail, Brown said.

If T2 has conviction in an asset, the company will provide the capital and become a priority in the capital stack. 

“We don't make a loan without asking ourselves, ‘Are we comfortable owning the asset at the end of the day?’” Brown said. “Not that we're trying to or want to, necessarily, but if we need to, are we comfortable? And so that's a threshold question for us.”

On the acquisition side, T2 has focused its strategy on buying up existing multifamily and student housing assets below replacement costs, then implementing value-add tactics. The comparison between what it takes to buy a house compared to what it takes to rent still greatly favors renting, so there is a lot of momentum behind multifamily, Brown said. 

It is easier to make acquisitions work financially compared to new builds because of the elevated cost of construction, Brown said. The current political focus on deportations will only serve to amplify construction costs, as so much of the industry’s labor pool is immigrants, he said.  

“That's been a shift that's been ongoing, I would even say since Covid, where construction costs just spiked so significantly and supply chains were constrained,” Brown said. “Now it's only being exacerbated when you consider shrinking the labor pool.” 

T2 has talked internally about the fallout of deportations on the international student population, which has led to “tepidness” from certain investors that want to see what happens with student visas before deciding to buy or sell student housing assets.

A federal judge last week struck down the Trump administration's efforts to bar Harvard University from hosting international students. Brown said it feels like there is a chance the international student situation works itself out. 

“It’s still a risky proposition until anything is settled,” he said.

When T2 is identifying the student housing properties it is interested in, it targets properties where students are slightly farther away from campus. That leads to a lower price point for the units, or roughly half off top-of-the-market rent, Brown said. 

“We have a much broader pool of prospective renters at that price point and have had a great run for the past several years in absorbing the property and then ultimately selling,” Brown said. 

Brown said T2 maintains separate teams on the credit and acquisition and development sides, but there is a lot of comparing notes. When the company outlines its pipeline for the credit side, the acquisitions and development team sits in on the meeting, offering perspective on the market and relevant expertise.

The company is paying more attention to one-off, broken-balance-sheet-type situations.

“Those that can build a conviction on an asset class in the market right now, it's a really unique buying opportunity,” Brown said.