Presented By: Partner Insights
Fulcrum Lending CEO Maxwell Wu Sees the Future of Multifamily Finance as a Partnership between Community Banks, Technology and Private Credit
By Partner Insights March 31, 2025 8:00 am
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Partner Insights spoke to Maxwell Wu, Co-founder and CEO at Fulcrum Lending based in New York City about his firm’s unique take on private credit, technology, and financial trends in the multifamily space. Before launching Fulcrum, Wu led the spinout of a technology group from Greystone, serving as the chief underwriter while leading the team in credit analysis, structuring, and business development.
Commercial Observer: Can you talk about why so much emphasis is being placed on the private credit market and what role your firm plays?
Maxwell Wu: Private credit has brought much needed stability to an increasingly volatile market. What’s most interesting is the long-standing power and opportunity that private credit offers investors and lenders in the short term, while benefitting the broader market in the long term.
Once debt is created, whether it’s public or private, it can be very hard and expensive to retire. Every year, with the help of inflation, the number steadily increases, and it becomes imperative to roll old loans into new ones as they mature.
Without firms like ours who can step in at points of market dislocation and refinance the large swath of maturing loans this year at leverage points and rates that borrowers can stomach, chaos will ensue. Because of regulatory concerns and protections for consumers, many incumbent lenders can’t provide that service, and rightly so.
We make these higher leverage loans work because we have access to long-term capital from our investors who don’t need immediate liquidity. Our business is structured to closely match liabilities to assets.
It’s an exciting revolution that private credit is bringing to the broader market and we’re excited to take part in reshaping the multifamily finance space.
How is technology transforming the commercial real estate market in general and the multifamily segment in particular?
Technology, as it relates to CRE, provides two core benefits: transparency and efficiency. Multifamily in particular presents a really interesting place for these types of technologies because of the sector’s ubiquity and homogeneity in the U.S. market. Multifamily is everywhere and accounts for 50% of all the outstanding commercial real estate (CRE) debt.
Broadly speaking, technology has lowered the barriers to entry for many who would like to compete in the CRE; for multifamily in particular it has made it more of a commodity. With commodity businesses, sourcing, speed and agility are the keys to winning.
What we have done is we’ve gone deeper and have taken a core infrastructure approach that goes beyond just the application of our technology. We have paired technology with capital to simplify the lending process, creating new and scalable financing products that are integrated with our technology and that both borrowers seek and capital markets participants understand. The result is a streamlined multifamily lending strategy that is easy to actively manage at scale and loan product that borrowers actually want.
Why do you think local and regional banks have been hit so hard and how do you see their role in multifamily financing in the future?
As cheesy as it sounds, real estate is about relationships and banking is no different. Community banks play a very large role in financing local economies and small businesses. People are standing behind those small businesses and local economies and those relationships matter.
When you boil it down, community banks are built to be originators and they have the ability to commit capital, so why shouldn’t they have a role? We think they should, but as I mentioned, multifamily has become hypercommoditized and with that, pricing and competition can become heated, resulting in loans and mortgage securities on balance sheets that frankly shouldn’t have been done.
Banks have suffered from having to compete against global investors in order to keep their relationships – they’re simply not set up to financially engineer risk and manage their balance sheets as fluidly as the large institutions. So what we’ve done is to create a system that allows the very fragmented world of banking (4,000+ banks across the US) to be able to serve their clients by making the same high leverage loans as their bulge-bracket competitors do but with less risk through our correspondent lending program. In the end, we believe relationships win so long as borrowers can receive an equal if not better product or solution.
With our system in place, our partner banks more effectively win deposits, retain clients, increase non-interest income and manage balance risk, all with a single loan product, backed by our expertise and technology as the solution.
What type of lenders does your firm prefer to work with, and what makes them good partners?
We prefer lenders that overlap with our credit culture. We ask questions like, “What is your view on creation value? How well do you understand the asset class of multifamily? How well do you understand the key geographies and how strong are your relationships with borrowers?”
We want them to know the market, the asset, and the borrower really well. How do they structure risk, what is their origination strategy and their underwriting standards? From there, we’re able to select the best lenders.
In volatile times people can behave very oddly, as seen during the GFC and COVID, and they don’t always make the best decisions. Knowing your partners matters. Knowing how they will react to adverse times is important because we’re lending to businesses run by people who are backed by an asset.
Do you think investments in multifamily credit offers opportunities for private equity funds looking for higher yields in the current market conditions?
The short answer is yes. Earning current yield in real estate used to mean buying into real estate equity to earn your six to eight percent if you were a core-plus or value-add investor. Mind you, this comes with first dollar risk and a low cap rate. Now investors can earn the same, if not greater, yields through bonds and private credit alternatives.
Good investing, in my humble opinion, has always been about risk mitigation not chasing yields. I think many have lost sight of this.
When you have yields matching and sometimes exceeding the S&P average yet the physical downside protection of an over-collateralized asset, it makes sense to diversify into credit and capture real yields so long as the risk asymmetry exists. Not gaining smart exposure to this asset class would be irresponsible for any fiduciary.
We offer investors that are interested in multifamily credit SMAs (separately managed accounts). It’s too expensive for them to set up a direct lending business of their own to access multifamily credit because many of the sophisticated shops know they just can’t win quality deals in this space unless they’re tied to a specialist like us. Our specialist and programmatic approach to this space brings deals to us first and to them near-last because our terms and cost of capital are the most competitive. Borrowers are also naturally wary of equity firms playing “lender”. As mentioned, multifamily is a hyper-competitive space and behaves like a commodity business. Our platform helps us evaluate things much faster and can ultimately get deals done at a lower cost. At the end of the day, winning in credit is about access, speed and agility.
How does your firm work with pensions, foundations, endowments, and trusts to manage payout obligations?
The current environment supports credit, if you are a liability driven investor. LDIs have unique needs – principal protection is first and income is second. Their business is writing future liabilities that they are obligated to pay out and planning for these payouts in a volatile market is quite difficult.
Going back to the model of investing in core deals with first dollar risk to earn a high single digit return, you can now do the same thing in credit markets but with last dollar exposure. This dependability and stability is important for LDIs. It’s a no brainer for them to be investing into credit in this current yield environment.
How does your firm work with liability driven investment (LDI) strategies to open new avenues in debt financing?
We set them up with SMAs that provide access to direct lending channels. This isn’t new and many have access to other fixed income investments that typically come with some liquidity as compared to private credit.
They give up higher premiums in exchange for liquidity. LDIs don’t need to prioritize liquidity because they’re not traders, they’re investors. If we can show them a predictable path to earning the appropriate amount of income to offset their future liabilities, they don’t need to worry about selling. They can earn an illiquidity premium on the same asset in senior loan form that would otherwise be in a broadly marketed securitization transaction.
